Search
calculate the aggregate expenditure and multiplier when C= 300+0.14Y, I= 700, G = 5000, TX= 3+ 0.0Y and TR= 90
Review the discussion of bias in the CPI. Explain why failure to consider the quality improvement of a
new good leads to an upward bias in the trend of the CPI. Pick a good you are familiar with. Explain how its
quality has changed and why it might be difficult for a price index to capture the increase in quality.
QUESTION THREE
Recently, the Transport Association of Zambia increased the price of bus fares for all long routes in Zambia. Specifically, the price of tickets between Lusaka and Livingstone increased from 200 Kwacha to 250 kwacha. The demand equation is representative of the demand for bus tickets between Lusaka and Livingstone.
a)Calculate the old price quantity demanded level
b)Calculate the new price quantity demanded level
c)Work out the Price Elasticity of Demand for tickets from Lusaka to Livingstone between 200 kwacha and 250 kwacha
d)Briefly discuss the Price Elasticity of Demand for tickets from Lusaka to Livingstone between 200 kwacha and 250 kwacha and clarify revenue
Carefully show how expected inflation determines interest rates per the loanable funds theory. (6marks)
What are the benefits of portfolio diversification? Would an investor be better off with an over diversified portfolio? Explain. (7marks)
Discuss the loanable funds theory and interest rates (12marks)
Suppose a consumer utility function is given by U(X,Y)=XY+8X the price of good X and Y are 2 birr and 6 birr respectively the consumer has total income of 160 birr to be spent on two goods
A) find the utility maximizing quantities of good X and Y
B) find MRXSY at equilibrium
why did trade deficit decrease in India during 2016-18
Assume that the economy starts at the natural level of output. Now suppose there is a permanent increase in the relative price of oil.
a. Using the wage-setting and price-setting diagram (and explaining the intuition of the curves), show what happens to the unemployment rate in the medium run. Why does this happen? (4 marks)
b. Assuming a simple production function, Y=N, where Y is output and N is employment, explain what happens to mediumrun equilibrium output. (2 marks)
c. Assume the central bank has an inflation target. In an AS−AD diagram (explaining what lies behind the curves), show what happens to output and inflation in the short run and the medium run. (4 marks)
