Macroeconomics Answers

QUESTION SEVEN

Use the following labour input requirements to answer the questions below:

Mask Sanitizer

Zambia 2 hours 6 hours

Malawi 3 hours 2 hours

a. What is the relative price of masks in terms of sanitizers in Zambia? In Malawi?

b. Where will the free trade price settle post trade? Who will export which good?

c. If the post-trade relative price of mask in terms of sanitizer is equal to 2/3, show what

happens to consumption of masks and sanitizers in Malawi and Zambia pre- and post-trade. Use

this information to calculate the wage in Malawi relative to Zambia post-trade.

d. Show that unit labor costs post-trade are consistent with the pattern of trade.

e. If you are able to graph the relative world demand and supply curves using all the above

information and solutions, kindly do so.

[15 marks]

QUESTION ONE

Given two countries, Zambia and Malawi that produce iron sheets and key holders. Zambia exports

iron sheets and imports key holders. Use an appropriate trade model to illustrate how national welfare

in Malawi is affected or changes. Suppose Zambia undergoes some recession and fails to produce iron

sheets such that her capacity to export gets affected drastically such that she becomes an importer of

iron sheets. What would be the effect of such a slump on ToT for Malawi? [10 marks]

Explain the term “exchange rate pass-through”.

QUESTION ONE

Use a well labelled graph to briefly illustrate the effect of an import tariff imposed by a large country.

Hint: show how various economic agents gain or lose.[15 marks]

QUESTION ONE

A milling company tripled its respective proportions of labourers as well as raw materials in the hope

of mounting its productivity. However, the amount of mealie meal produced also tripled. Identify a

model that you physically learnt in class and briefly relate it to the above scenario. [15 marks]

QUESTION ONE

Let’s assume there are no labour migration obstacles in Zambia and Malawi. A milling plant in Malawi

pays its workers K50.00/hour whereas in Zambia, it pays K10.00/hour. Graphically show how

international labour mobility would affect output, workers and land owners in both countries. [15 marks]

QUESTION ONE

In Zambia, climate change affects the food security of many Zambians especially farmers. Such effects

as prolonged droughts affect Zambia’s self-sufficiency level in staple food, maize. Consequently, she

engages in free trade especially within Sub-Saharan African countries, and ultimately changes her

efficient consumption and production outcomes. As a student of International Economics, give a

comprehensive and relevant discussion of the above scenario. [15 marks]

Collect data on National Saving of Ethiopia from 1991 to 2020 for the last 30 years and depict them via graph and compare it with average saving rate for Sub-Saharan Africa. Discuss the major macro policy issues that determines national saving in developing countries and their effects on saving (10 marks)

After worst recession in Malaysia's history, strong economic recovery expected in 2021, Fitch's research unit predicts. Malaysia's real GDP in the second quarter of 2020 or from April to June as compared to the year before due to movement control MCO measures, which the unit describe as the worst contraction in Malaysia history. It also said -4.5 per cent outlook for Malaysia real GDP is due to forecasted weaker domestic and external demand in the second half of 2020 in line with expected continue restriction on travel and movement.

a)Based on above statement, do you agree or disagree the contraction fiscal policy helps to encounter the recession and recover the Malaysia economic in the second half of this year?

Discuss the conditions under which Monetary Policy and Fiscal Policy multipliers

are zero