Search & Filtering
Suppose that an economy is characterized by the following equations:
C = 400 + 0.75(Y - T)
a = 400 - 25r
G = 200
T = 200
to the private
MS = 2, 000 Derive:
i IS curve
P = 2
(M / P) * d = V - 200r
ii LM curve.
iii Equilibrium level of income and interest rate.
b) Kenya has recently lifted the interest rate cap in a move to revive shrinking cost access
sector. Do you agree with the move? Discuss c) Trade war happens when one country retaliates against another by using import tariffs or placing other restriction on the other country's imports. This can commence if one country perceives a competitor nation has unfair trading practices. Explain the policy implications of trade dispute in an economy.
a. Differentiate headline consumer price inflation from core consumer price
inflation. (4)
b. Mention three examples of headline consumer price inflation. (3)
c. “Low inflation against relatively high lending rates has supported the rand’s
attractiveness as a carry-trade target with yield-hungry investors happy to
ignore local risks for higher returns”. Clearly explain what this implies. (4)
d. What was the main reason for the SARB behind reducing interest rates? (2)
e. Why is it important that South Africa should be consideration of USA’s decisions
when deciding on its monetary policy stance? (3)
f. Why do you think the budget speech is important for monetary policy
committee’s decisions concerning change in interest rates? (2)
g. What does an undervalued currency imply?
b. Mention the types of inequality that were seen most during the period of hard
lockdown in South Africa.
Find on NBER-CES Manufacturing Database http://www.nber.org/nberces/ the data for sectors, number of total employees and production workers («naics», «emp», «prode»)
Average those numbers in aggregated sectors of production
Rank sectors by skill intensity (from lowest to highest)
Skill intensity is measured by classes of number of Production Workers in thousand;
Production Workers = Unskilled Labor;
Notice: The highest value of «prode» out of total employment corresponds to the lowest level of skill intensity.
Classify sectors by skillness quartiles (25% least skilled sectors, 25% medium-low skilled, 25% medium-high skilled, 25% highly skilled sectors) using the rank in the first part
Choose 3 developing and 3 developed countries and calculate their exports to the US within those sectoral groups
Test graphically for the Leontieff paradox
Discuss your results
What are the major policy conclusions of classical economics? Explain how these
policy conclusions follow from the key assumptions of the classical theoretical
system.
Within the classical model, analyze the effects of an increase in the marginal
income tax rate. Explain how output, employment, and the price level are affected.
Consider cases in which the increased revenue produced by the tax increase
results in a decline in bond sales to the public and in which it results in lower
money creation.
Explain how the interest rate works in the classical system to stabilize aggregate
demand in the face of autonomous changes in components of aggregate demand
such as investment or government spending.
Classical economists assumed that velocity was stable in the short run. But
suppose that, because of a change in the payments mechanism—for example,
greater use of credit cards—there was an exogenous rise in the velocity of money.
What effect would such a change have on output, employment, and the price level
within the classical model?
Explain how aggregate demand is determined within the classical model. What
would be the effects on output and the price level of a drop in money supply?
What are the differences between the Fisherian and Cambridge versions of the
quantity theory of money?
