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Consider a two-period economy populated with consumers that have the same income and the same preferences. G = 60, G' = 150. The government can borrow in the current period by issuing bonds. Each bond pays the real interest rate r. Consumers can also borrow at the same real interest rate r. Consumers’ optimal decisions, given r, imply that AG C* = 2/3 (Y− T) + 2/3 (Y' - T')/(1+r). Suppose that Y=Y' = 300.
Economic activity falls by 18 units in the current period. This recession is expected to continue and national income is expected to fall by 20 units in the future period. Consumers believe these expectations.
A) Calculate AD given the current period and recession.
B) Use a graph to explain why the equilibrium interest rate falls from 0.25 to 0.20
C) Explain why the government should not increase its expenditure G
D) Would a tax cut in the current period, that is decrease in T, be a better choice than an increase in G to fight this recession? Explain, why or why not.
With the aid of a well labelled diagram, carefully explain the impact on the
money market if there was a discovery of gold that fuels inflation.
Illustrate and carefully explain the impact of an increase in the income tax rate
from 25 percent to 35 percent on the demand for labour, supply of labour,
equilibrium wage and level of employment.
Calculate GDP using the Income and Expenditure Approach. (Both approach should be the same answer). Show all working for both Approaches
(all figures are in billions of dollars):
Item Amount ($)
Government purchase of goods and services 1,721.6
Exports 1,096.3
Receipts of factor income from the rest of the world 382.7
Depreciation (consumption of fixed capital) 990.8
Net fixed Investments 688.2
Corporate income taxes 265.2
Consumption expenditures 6,739.4
Indirect business taxes 664.6
Imports 1,475.8
Payments of factor income to the rest of the world 343.7
Inventory change 56.5
Social security contributions 702.7
Undistributed corporate profits (retained earnings) 130.3
Government transfer and interest payments 1,366.3
Personal interest payments 286.2
Personal taxes 1,235.7
Which of the following is not true:
A. Cyclical unemployment exists because of recession
B. Full employment requires that no cyclical unemployment exists on the labor market
C. Structural unemployment exists because of mismatched worker skills and job availability.
D. It is logically impossible for both the unemployment and the employment rates to both simultaneously increase or decrease
E. Frictional unemployment on the labor market arises from a lack of information in the labor market.
In considering the effect of menu costs on the economy, Mankiw argues that:
United States v. Microsoft Corporation was a noted American legal case in which the U.S. government accused Microsoft of illegally maintaining its monopoly. Explain why the government often steps in to prevent the creation of large monopolies. Explain by using concepts such as market power and market structures. Use less than 800 words.
10. Describe how institutions, biology, technology, and preferences combine to determine the following:
a. Technically feasible set.
b. Contract curve.
c. Final outcome.
i wanna ask, what are the effect of an increase in human capital on the
equilibrium values of real wage and employment?
Describe how institutions, biology, technology, and preferences combine to
determine the following:
a.Technically feasible set.
b.Contract curve.
c.Final outcome.
