Macroeconomics Answers

Using market supply and market demand curves describe how the market will react to the introduction of statutory minimum wage

1. The Bahamas has experienced several adverse supply shocks in the past that has challenged the stability of the economy, however, much of this downturn was mitigated by government intervention. This approach runs contrary to the classical remedy. Evaluate the government’s efforts to reduce the impact of these adverse shocks (use specific examples). 

How would the purchase of bonds by the central bank from local banks be likely to affect

interest rates? How about the effect on interest rates of the sale of bonds? Explain.

The GOP deflator in Econoland is 200 on January 1, 2005. The deflator rises to 242 by January 1, 2007, and to 266.2 by January 1, 2008. n. What is the annual rate of inflation over the two-year period between January 1, 2005, and January 1, 2007?In other words, what constant yearly rate of infla- tion would lead to the price rise observed over those two years? b. What is the annual rate of inflation over the three- year period from January 1, 2005, to January 1, 2008? c. In general, if Po is the price level at the beginning of an n-year period, and P" is the price level at the end of that period, show that the annual rate of inflation It over that period satisfies the equation (1 + It)'' = P,/Po.

A new office building was constructed 5 years ago by a consulting engineering firm. At that time the firm obtained a bank loan for $100,000 with a 12% annual interest rate, compounded quarterly. The terms of the loan call for equal quarterly payments to repay the loan in 10 years. The loan also allows for its prepayment at any time without penalty. As a result of internal changes in the firm, it is now proposed to refinance the loan through an insurance company. The new loan would be for a 20-year term with an interest rate of 8% per year, compounded quarterly. The new equal quarterly payments would repay the loan in the 20-year period~ The insurance company requires the payment of a 5% loan initiation charge (often described as a "5-point loan fee"), - which will be added to the new loan.

(b) What is the difference between the equal quar terly payments on the present bank loan and the proposed insurance company loan?

Which one of the following statements regarding taxation is correct?

A. Administrative simplicity in the tax system ensures neutrality and equality.

B. The aim of taxes is to distort relative prices and change the behaviour of taxpayers.

C. In a good tax system, various taxpayers with different income are taxed the same.

D. Taxes which induce taxpayers to change their behaviour are not neutral.