Macroeconomics Answers

Draw the appropriate curve in each of the following cases. Is it like or unlike the curves you have seen so far? Explain.

How to calculate the cost of the CPI basket

Economics

Suppose you are the coach of a team consisting of two players, Bill and Ted. Each player has 60 minutes to be allocated to either right position or left position. Note: at all times there must be one player in right position and one player in left position.

For Bill, every minute allocated to right position yields 0.2 points and every minute allocated to left position yields 0.4 points. For Ted, every minute allocated to right position yields 0.3 points and every minute allocated to left position yields 0.6 points.

a) Construct a diagram illustrating the production possibilities frontier for each of these individuals. Be sure to label each axis appropriately and identify relevant intercept values.

b) Who has the absolute advantage in right position? Who has the absolute advantage in left position?

c) Who has the comparative advantage in right position? Who has the comparative advantage in left position?

d) To maximize the probability of winning, how must you allocate your resources?

he slope of the AE curve is .80. What is the multiplier? Everything else the same, by how much 

does equilibrium aggregate expenditure increase if

a) exports increase from $1.75 trillion to $2.25 trillion. (8 marks)

b) government expenditure on goods and services decrease from $2.0 trillion to $1.8 trillion.

(6 marks)

c) investment increases from $1.2 trillion to $2.3 trillion. (6 marks)

Distinguish between transactionary demand for money and speculative demand for money. What are the determinants of these demand for money types? Explain.

What are inflationary and deflationary gaps? Used money and goods market diagrams to illustrate how monetary policy can be used to close an inflationary gap.