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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)
How fast is a rabbit
Describe five economic effects of a continuous, moderate inflation.
Give three reasons why national income accounts are not very useful in making
comparisons of living standards between countries.
Explain the three ways of measuring the national income figure.
