Macroeconomics Answers

Drawing diagram explain the process of crowding out. Also explain why the private sector might find budget deficit detrimental to their business planned projects.

4. The official unemployment rate understates the unemployment level in the economy because the official unemployment rate:

A. ignores the duration of unemployment.

B. ignores underemployed and discouraged workers.

C. includes jobs created by the underground economy.

D. excludes all unemployed teenagers.

E. excludes frictional unemployment.

1.     In national income accounting, consumption expenditure includes the purchase of:

A.   both new and used consumer goods.

B.    cars and new houses.

C.    non-durable goods and services.

D.   capital goods.

E.    used goods that were produced in the current year.

Q.1 a) According to the misperceptions theory, what effect does a reduction in the actual price level have on

the amount of output supplied by producers? Explain using labour market analysis.

b) Will there be any relationship between inflation and unemployment either in the short run or in the

long run in the context of part (a)? What factors account for the different opinions of economists about

this relationship?

c) What is price stickiness? Why do New Keynesians believe that allowing for price stickiness in

macroeconomic analysis is important?

Suppose you deposit R10 000 in a bank and the reserve requirement is 0.25. If the banking

system has zero excess reserves, then the total amount of new money (not counting your

deposit) that can be created is:

A. R10 000

B. R30 000

C. R40 000

D. R 2 500

E. R 7 500

For each of the following, determine whether the IS curve, the LM curve, both curves or neither curve shifts. In each case, assume that expected current inflation and future inflation are equal to zero, and that no other exogenous variable is changing.

a.     A decrease in the expected future real interest rate.

b. A decrease in the current short-term nominal interest rate.

c.    An increase in expected future taxes.

d.     A decrease in expected future income.

On Tuesday (Jan 12) the Economist magazine said that the exchange rate between the Canadian Dollar and the Euro was 1.55. On the same day, the Times newspaper said it was 0.65. Which got it wrong?

If the number of employed (E) and the number of unemployed (U) each increase by 10,000 people, what happens to the unemployment rate? Why?

Assume the Consumer Price Index (CPI) rises by 5% and average household income rises by 5%. What happens to the standard of living? Why?

Project Assignment Question: By taking one company as an example

(preferable the company you work in), develop a five year strategy for the

company you selected. While developing the five year strategy plan for your

selected plan, the strategy plan need to have the three phases of strategic plan

namely Strategy Formulation, Strategy Implementation and Strategy

Evaluation.