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Given the following data, calculate NDP at FC.
Particulars
(In Lakhs)
1. Wages
10,000
2. Rent
5,000
3. Interest
400
4. Dividend
3,000
5. Mixed income
400
6. Undistributed profit
200
7. Contribution to social security schemes (employer)
400
8. Corporation Profit tax
400
1. Explain the effect of contractionary monetary and fiscal policy on income and interest rate based on the following cases. And support your explanation using graphs.
a. There is fixed exchange rate regime and perfect capital mobility.
Based on absorption approach, discuss how an economy can improve its trade balance.
Suggest how the problems of price control can be resolved without having the government to intervene in the market and actions that can be taken by both consumers and producers.
Suppose that you are the member of the Board of Governors of
the State Bank. The economy is experiencing the severe
unemployment. What changes in
A. The Reserve Ratio
B. The Discount Rate
C. Open Market Operations
would you recommend? Explain in each case how the change you
advocate would affect the money supply, interest rate and aggregate
demand and authenticate your arguments with monetary transmission
mechanism diagram.
Suppose the production function for a newly discovered product through research is given by Y = 100 (L- F), where Y = output of the new product, L = labor input, and F =fixed amount of labor input required to invent the idea (cost incurred before the first unit of output can be produced). Assume that there is no production if L < F; and each unit of labor L costs a wage rate w.
(a) Find the cost function C(y) that represents the minimum cost required to produce Y units of output.
(b) Given a price P which the firm faces for each unit of output produced, show that the firm cannot make profit and operate in perfectly competitive market settings.
An economy following a flexible exchange rate regime is in its long run equilibrium while suffering from a trade deficit. Would a reduction in government spending be helpful in eliminating the trade deficit? Explain indicating all co-movements both in the short run and the long run (assuming that Ricardian Equivalence holds)? How would this policy affect the trading partner of the home country? Use the IS-LM-FE and the foreign exchange market diagrams to explain.
Why the Central Bank of the trading partner may option for a fixed exchange rate regime. If the exchange rate were to be fixed between the initial and the new equilibrium values in domestic economy, what do you think the policy would imply? What effects would it have on the home economy and the trading partner?
why the central bank of trading partner may option for a fixed exchange rate
Suppose demand for inkjet printers is estimated to be QX = 1000 – 5PX + 10PY – 2PZ + 0.1M. If own price (PX) = 80, related prices, PY = 50, PZ = 150, and income, M = 20,000.Calculate own price elasticity of demand and interpret your result
