Macroeconomics Answers

Suppose the consumption behavior in problem 1 changes so that C=100+0.9Y. while I remains at 50. a. Is the equilibrium level of income higher or lower than it was in problem 1(a)? calculate the new equilibrium level, Y’, to verify this. b. Now suppose investment increases to I=100, just as in problem 1(d) . what is the new equilibrium income? c. Does this change in investment spending have more or less of an effect on Y than it did in problem 1? Why? d. Draw a diagram indicating the change in equilibrium income in this case.

which of the following statements are correct ?

i) Ceteris paribus, as the real wage rate increases, the quantity of labour demanded increases

ii) An increase in the working age population results in an increase in the supply of labour

iii) A change in the real wage rate brings a movement along the labour supply curve

iv) the demand for labour is determined by the diminishing returns to labour

A. Only (i), (ii) and (iv) are correct

B. Only (ii), (iii) and (iv) are correct

C. Only (i) and (iii) are correct

D. Only (i), (iii) and (iv) are correct

how many years will it take for GDP to double from 40 billion to 80 billion if the growth rate is 0,25% per year

How does the response of the interest rate to a change in the money stock depend on the

interest sensitivity of money demand? 

If aggretate exppenditure is greater than total income:

1. investment will decrease because such a high level cannot be sustained.
2. planned savings will decrease in line with investment.
3. output will increase to replenish depleted inventories.
4. investment will decrease to run down excessive inventories.
5. there is an error, since the two are same by definition

Consider the following information:

MPC = 0.9

Autonomous Investment = R200 m

Autonomous Consumption = R70 m

The equilibrium level of income is:

1. R300 m
2. R700 m
3. R2 000 m
4. R2 700 m
5. Impossible to calculate from the information given.

a. How does an increase in the tax rate affect the IS curve?

b.

How does the increase affect the equilibrium level of income?

c.

How does the increase affect the equilibrium interest rate?