Macroeconomics Answers

Explain the relationship between the rate of interest and demand for money within the Keynesian theory of money demanded.

How does this differ from the classical quantity theory of money demand?

Compare the effects of an autonomous increase in government spending in the IS-LM curve version of the Keynesian model with the effect of the same shift within the classical model

1. Consider the market for minivans. For each of the events listed here, identify if the determinants of demand or supply are changed. Also indicate whether demand or supply increases or decreases. Then draw a diagram to show the effect on the price and quantity of minivans. Finally, show the new equilibrium price and quantity as a result of the change. (HINT: start with an initial equilibrium on the Demand and Supply diagram). a. People decide to have more children.

Suppose that the following information describes the economy of Wonderland: C = 300 + 0.8Yd I = 300 G = 250 X = 300 M = 150 + 0.6Yd T= 0.25Yd Wonderland’s multiplier is calculated as:

“Individual demand depends on the demand of others”. Explain using demand supply

analysis with suitable graphs and examples.

formula for maximum profit output

1. Suppose that an economy is composed of three classes. Labourers, traders and capital owners. The size of each of the classes are 60%, 30% and 10% respectively. Laborers produce all the output in this economy by using capital borrowed from the capitalists and then use the services of traders to market their produce. For this, the labourers have to pay 40% and 20% of their produce to the capitalists and traders respectively.
2. Draw the Lorenz curve for the income distribution of this economy. Calculate the Gini Coefficient.
3. Suppose that the capitalist are taxed 10% of their income and this is distributed as transfers to the labourers. Draw the new Lorenz curve and compare income inequality between the market income distribution and the disposable income distribution.

If CRR in the economy is 5% and initial deposit in the commercial banks is ₹50,000, what will be the money multiplier and what will be the money supply in the economy.

1. Calculate the NNY if investment is 400, consumption change from 250 to 310 and NY from 7500 to 8500.
2. Calculate the NNY if export is 4550, consumption was 350 and is now 475, taxes changed from 50 to 125 and NY was 5000 and is now 7000.
3. Calculate NNY, if the investment is 375 consumption was 700 and is now 900, taxes changed from 70 to 175, imports changed from  100 to 175 and NY from 7500 to 9000.
4. Income increase from O to 100 and consumption 60 to 130. What is the consumption function?
5. Calculate the consumption if the income is O, 1500, 3000, and 4500, saving is -1000 and the savings change from 1000 to 1450.
6. Calculate NNY, if the government spending is 300, consumption change from 150 to 275 and NY from 500-6000.

1. A man has a rise in income from 25000 to 27000; as a result his savings rise from 900 to 1300. What is his MPC?
2. As income increases from 15000 to 17000 and savings from 5000 to 5800. What is MPC?
3. If in an economy, $20 is taxed out of every additional $100 in national income, $20 is saved and $10 is spent on imports. What is the value of the multiplier?
4. If in an economy, out of every additional 2000 of NY , 400 is taxed, 450 is saved and 100 is spent on imports. What is the value of the multiplier?
5. An economy has a NY OF 65m, a MPS of 0.3 and a MPT of 0.1. If the government wishes to achieve a NNY of 75m, how much will they have to increase spending by?
6. A man has an increase income from 35000 to 38000, as result his consumption increased from 14000 to 20000. What is his MPS?