Macroeconomics Answers

You are given the following information about an economy:

Gross private domestic investment = 40

Government purchases of goods and services = 30

Gross national product (GNP) = 200

Current account balance = -20

Taxes = 60

Government transfer payments to the domestic private sector = 25

Interest payments from the government to the domesticprivate sector = 15 (Assume all interest payments by the government go to domestic households.)

Factor income received from rest of world = 7

Factor payments made to rest of world = 9

Find the following, assuming that government investment is zero:

a. Consumption

b. Net exports

c. GDP

d. Net factor payments from abroad

e. Private saving

f. Government saving

g. National saving

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;

A. Compute private saving, public saving, and national saving.

(5 Marks)

B. Find the equilibrium interest rate. (5 Marks)

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

D. Find the new equilibrium interest rate. (5 Marks)

A. In your hypothetical economy, The Gross Domestic Product at Current Prices for 2021 was estimated at K10000 compared to K8000 recorded in 2020. In addition, Gross Domestic Product at constant market prices was K8000 in 2021 and K600 in 2020. Calculate the GDP deflator for 2020 and 2021 and the inflation rate between the two years

B. Explain how strong trade unions can cause unemployment and inflation in an economy.

Describe Keyne's theory of aggregate demand as it relates to wage levels and employment. Did Keynes believe that unemployment is caused by sticky wage.

Is an increase in unemployment rate necessarily a good thing for a nation? Expain

Explain the difference between competitive and monopsonistic labor markets. How does the

monopsonistic firm optimize its choice of optimal labor?