Macroeconomics Answers

a)           Consider the following model of National Income determination

                           C= 3000 +0.75 (Y-T)

                           T=1000

                            I= 4750

                           G=1500

                           Y=E=C+I+G

Required:

       i.           Solve for the equilibrium values for all the endogenous variables                          (4 mks)

     ii.           Suppose government expenditure increases by 50 find the new equilibrium values of the endogenous variables                                                                                               (4 mks)

   iii.           Calculate the value of the government spending multiplier                                     (2 mks)

In the circular-flow diagram, the goods markets are where: (2) (a) The households purchase goods from firms; (b) Firms purchase goods from government; (c) Firms purchase goods from households; (d) The government purchases goods from households

An increase in the price of oil is an example of a negative supply shock. Use the AD-AS model graph to explain the effect of a negative supply shock on the price levels and output levels in the economy

Explain, with the use of a graph the impact that an increase in the volume of exports from South Africa to the United States will have on the demand and supply of dollars and the exchange rate in South Africa?

Even when allowed to collude, firms in an oligopoly may choose to cheat on their agreements with the rest of the cartel. Why?

What is a tarriff

 In the Keynesian model, an introduction of a proportional tax will:

discuss three broad functions of the government

Suppose, the government has decided that the free-market price of sugar is too low.

Government has imposed a binding price floor of per kg sugar at 60 taka, whereas,

the market price was 50 taka per kg before the announcement.

a. Explain the effects of this flooring price on the demand and supply of the sugar

market. In your graph, show the effects of the price changes on quantity

demanded and quantity supplied. Does it create excess supply or excess

demand? What will happen to the market price?

b. In the above situation, who (buyers or sellers) is going to get the benefit from

such policy? Explain it in your own words (clue: use a graph where a Price

flooring is binding).

Give two examples of important trade-offs that you face in your life.

a. Draw a production possibilities frontier to illustrate your each trade-off

situation. What do you suppose determines the shape and position of the

frontier?

b. Using the concept of opportunity costs, explain whether you had a bowed-out

shape PPF or straight line PPF?