Macroeconomics Answers

Permanent Income of consumption is just the average of all current and future incomes. Thus, one does not need to do the maximisation of intertemporal utility”. True or False. Discuss according to the model

Discuss Milton Friedman’s permanent income hypothesis and differentiate it from the life cycle hypothesis and differentiate it from the permanent income hypothesis

Suppose the economy of a country is derived by the following equation.Derive the I-S equation

Y= C+I +G+X (income Identity)

C=75+0.72Yd (Consumption)

I= 100 - 500r (Investment)

X= 100 - 0.12Y -500r (Net Exports)

researcher wants to estimate the reserve demand equation i.e. growth rate of Forex reserves (percentage change in total reserves minus gold) held by the central bank of country A as function of growth rate of exchange rate (percentage change in exchange rate) and interest rate differential (difference in money market interest rate of Country A and the Fed Funds Rate) using monthly data from January 1994 to July 2021. Assuming that the researcher has found 3 breaks based on multiple breakpoint test. Formulate an econometric model to account for these breaks (you may decide to use your own break dates) using relevant variables and interpret the coefficient of this model.

“Neither empirical evidence nor theoretical logic offers any justification for the persistence of the dominant position of the kinked demand curve as a model of oligopolistic behavior.” Discuss this statement and consider whether alternative models of oligopoly represent any advance on the kinked demand model.

How would the decision be influenced by: (i) the firm's precarious financial position; (ii) the knowledge that the machinery is to be scrapped after the next production run.

It is sometimes argued that economic growth that is “too rapid” will be associated with inflation. Use AD-AS analysis to show how this statement might be true. When this claim is made, what type of shock is implicitly assumed to be hitting the economy

How do Keynesians and classical differ in their beliefs about how long it takes the economy to reach long-run equilibrium? What implications do these differences in beliefs have for Keynesian and classical views about the usefulness of anti recessionary policies? About the types of shocks that cause most recessions

Draw a diagram showing the phases and turning points of a business cycle. Using the diagram, illustrate the concepts of recurrence and persistence

1. a. What is free-riding? Why do self-interested players free-ride? Explain via an example.
2. b. Explain via an example (other than the example in the e-book) how introduction of altruism can resolve a social dilemma.