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popeyes income declines and, as a result he buy more spinach. in spinach an inferior or a normal good? what happens to propeye's demand curve for spinach?
Cuba is an exporter of grain to North Korea. In a closed economy Cuba must have a domestic price that is _____ the world price of grain.
A) less than
B) greater than
C) equal to
D) close to
Q.2 a) 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.
b) Using the analysis in part (a), indicate why the central bank of the trading partner may opt 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? Use the foreign exchange market and the FV-Ms diagrams to explain.
(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 aboutthis relationship?
c) What is price stickiness? Why do New Keynesians believe that allowing for price stickiness in macroeconomic analysis is important?
use the AD-AS model to explain how an expansionary monetary can affect output/income
“Increase in net capital inflow will increase interest rates in the domestic loanable funds
market” – do you agree with this statement? Explain by drawing a diagram and
comment how you think investment will change if there is an increase in capital inflow.
If the consumption function is reading as C=290+0.9Y. Therefore the savings function will read as
Show the effect of stringent anti-trust legislation and higher employment
protection on natural employment through price and wage setting curves? How the
natural employment changes when Oil Price increase (add the explanation through
IS-LM-AD-AS framework.)?
Using IS-LM concept, show and explain the net effect of an increase in corporate
tax and increase in consumer confidence on equilibrium output and interest rate?
How does earlier effect changes if there is a slight positive relationship between
money supply and interest rate
Consider the following information:
Marginal propensity to consume = 0,9
Investment = R180 million
Autonomous consumption = R105 million. The equilibrium level of income is:-
Question 2 options:
