Macroeconomics Answers

Give three reasons for the downward slope of the aggregate demand

curve.

4. How would an increase in the supply of labor affect the natural level of employment and potential output? How would it affect the real wage, the level of real GDP, and the price level in the short run? How would it affect long-run aggregate supply? What kind of gaps would be created

Recall that an exchange rate is the price of one currency in another. For example, it may take US $1.35 to buy 1 British Pound. Also recall the interest rates affect exchange rates. What do you predict will happen to the foreign exchange rate if interest rates in the United States increase more than in the UK? (In other words, which currency will become stronger?) How would such a change affect US exports to the UK? Would it be less expensive for an American tourist to take a vacation to London after the interest rate change? Be sure to clearly explain and justify your reasoning. 

Two products

YR 1

YR 2

P1

W1

P2

W2

Call center

10

50

12

50

Banking

10

50

12

60

d. Using year 1 prices, what is real GDP per worker in year 1 and year 2? What is labour productivity growth between year 1 and year 2 for the whole economy? Now suppose that banking services in year 2 are not the same as banking services in year 1 because they include internet banking, which year 1 banking services didn’t include. The technology for internet banking was available in year 1 but the price of banking services with internet banking in year 1 was $13 and no one chose that package. However, in year 2 the price of banking services with internet banking was $12 and everyone chose to have that package in year 2 (that is, in year 2 no one chose to have the year 1 banking services package without internet banking). 

Discuss the circumstance where fiscal expansion leads to full crowding out

E xplain using an appropriate model why transactions demand for money increases with square root of in come and interest rate decrease s with the square root of

disscuss mathematically graphically and ecnomically the major reason behind a comparatively steeper LMschedule

Suppose perfect competitive firm short run cost function

total cost=1/3q3+3q2+10Q+40

. if the market price of the commodity is birr 26 per unit

A, determine the profit maximizing level of out put

B find average fixed cost ,average cost ,average variable cost and marginal cost of firm at optimum level of out put

C find maximum profit of the firm

PROBLEM 1

Use the following news clip to work Problems 21 to 23.

Hong Kong Overflowing in Cash

In 2017, Hong Kong’s government debt was 43.9 percent of its nominal GDP. In the same

year, it witnessed a budget surplus of HK$138 billion. In March 2018, Paul Chan, Hong

Kong’s financial secretary, promised to return 40 percent of the surplus to the community

but stressed the importance of saving for the future.

Source: Bloomberg and ceicdata.com, March 2018

21. How does Hong Kong have a high debt percentage while also enjoying a large

surplus? How does debt financing affect monetary policy?

22. How would the budget surplus be affected if Hong Kong’s central bank decreased

interest rates?

23. a. How would Hong Kong’s budget surplus change in the 2018 and 2019 if its central

bank moved interest rates up?

b. How would Hong Kong’s budget deficit change in 2018 and 2019 if its central

bank’s monetary policy led to a rapid appreciation of the Hong Kong dollar?

Malaysia’s Central Bank Raises Interest

In January 2018, Bank Negara Malaysia (BNM), Malaysia’s central bank, raised its

interest rates for the first time since July 2014. Economists speculated that it is a

one-time event and that that there won't be other interest rate hikes given that

Malaysia’s growth is steady and inflation is mild.

Source: Reuters, January 25, 2018

a. Why do you think some economists speculated that the interest rate hike is a one-

time event?

b. What would be the effects of BNM hiking the interest rate? Explain the immediate

effects and the ripple effects.

c. What could be the risks arising out of no interference from the central bank?

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