Macroeconomics Answers

aggregrate demand and aggregate supply can be used to analyse the linkage between the monetary and real sectors of the economy. use the AD-AS model to illustrate and explain the impact of the devastating drought on the general price level and the level of real production and income in the economy

What are the three basic decisions every economy must make? Why must these decisions be made?`

For the theories under the determination of exchange rates;

Give a background of the theory i.e. who originated the theory, what are the conjectures of the theory etc. 

Highlight how the theory best explains the determination of exchange rates. 

Do you think a floating exchange rate is a better option for protecting the value of a domestic currency versus a fixed exchange rate?

Discuss the relevance of the given theory in a South African and global perspective using empirical evidence.

The private marginal benefit for commodity X is given by 10-X, where Z is the number of units consumed. The private marginal cost of producing X is constant at $5. For each unit of X produced, an external cost of $2 is imposed on member of society.

a. In the absence of any government intervention, how much X is produced?

b. What is the efficient level of production of X?

c. What is the gain to society involved in moving from the inefficient to the efficient level of production?

d. Suggest a Pigouvian tax that would lead to the efficient level. How much revenue would the tax raise?