Macroeconomics Answers

The demand curve for money will shift to the left if: 

I. Real GDP increases. 

II. Real GDP decreases. 

III. The interest rate increases. 

IV. The interest rate decreases.

A. Only (II) is correct.

B. (II) and (III) are correct.

C. (I) and (IV) are correct.

D. (II) and (IV) are correct.

Which of the following is correct in respect of “money as a medium of exchange”?

(i) Money facilitates the exchange of goods.

(ii) Money reduces or eliminates the need for barter.

(iii) Money is an object that sellers will accept as payment.

A. only (i) is correct.

B. only (iii) is correct.

C. (i), (ii) and (iii) are correct.

D. only (i) and (ii) are correct.

Suppose that the public hold no currency. Total reserves = R10 billion, demand deposits = R50 billion, 

and the required -reserve ratio is 10 percent. How large are the commercial bank’s excess reserves?

A. R 1 billion.

B. R 5 billion.

C. R 40 billion.

D. R 55 billion.

Consider the UNILUS economy in the long-run described by the following equations:

Y = C + I + G, Y = 5,000, G = 1,000, T = 1,000, C = 250 + 0.75(Y − T), I = 1,000 − 50r. C=100+b(Y-50-0.25Y);

Compute private saving, public saving, and national saving.

(5 Marks)

Find the equilibrium interest rate. (5 Marks)

Now suppose that G rises to 1,250. Compute private saving, public saving, and national savings. (5 Marks)

Find the new equilibrium i

Consider the UNILUS economy in the long-run described by the following equations:

Y = C + I + G, Y = 5,000, G = 1,000, T = 1,000, C = 250 + 0.75(Y − T), I = 1,000 − 50r. C=100+b(Y-50-0.25Y);

Why is stagflation a problem for any economy?

Suppose that country A and country B currently have identical production possibility frontiers, but that country A devotes only 5 per cent of its resources producing capital goods over each of the next 10 years, whereas country B devotes 30 per cent. Which country is likely to experience more rapid economic growth in the future? Illustrate using a production possibility frontier graph. Your graph should include production possibility frontiers for country A today and in 10 years, and for country B today and in 10 years.

11. The economy of Naboo has a population of 10 million

people, of which 7 million are in the labour force. Three

(3) million people work in the construction sector, two (2)

million people work in the services sector, one (1) million

people work in the IT sector and one (1) million people

unemployed.

unemployed construction workers with respect to total

number of unemployed people is the same as the fraction

of employed construction workers with respect to the total

population. And the fraction of unemployed service

workers with respect to the total number of unemployed

people is the same as the fraction of employed service

workers with respect to the total population.

a. Suppose that the construction sector faces reduced

demand, and is forced to lay of 2 million workers. 1.5 million of them stay in the labour force while 0.5 million discouraged workers were laid-off. Calculate the unemployment rate in Naboo.

2.1 Under fixed exchange rate regime, appreciation pressure on exchange rate will results in capital inflows. True or false? Explain your answer. (5 marks)

2.2. The impossible trinity suggests that a central bank can prevent a balance-of-payments crisis by limiting the cross-border flows of capital. True or false? Explain your answer. (5 marks)