Macroeconomics Answers

1. Explain the three possible profit maximizing positions of perfectly competitive firms in the short-run. 
2. Distinguish between the short-run aggregate supply curve and the long-run aggregate supply curve

 Write down and explain the uncovered interest parity (UIP) condition. (a) What does it imply about the relationship between domestic and foreign interest rates? (b) Suppose that you expect the Ghana cedi to appreciate relative to the US dollar, which bond should you buy? What happens to the domestic (i.e., Ghana) interest rate relative to the US? Explain. 

1) If an economy can raise its annual real GDP growth rate from 3.8 percent to 4.5 percent, its real GDP doubling time is reduced by 15 years.

2) Suppose that the government passes a law requiring households to increase savings 10% above previous levels. According to Solow's growth theory, in the long run output per capita will grow less rapidly.

3) If K = 3000, n = 0.02, and depreciation, δ= 0.04 and g=0.03, then investment of 320 will hold (K/AL) constant.

5) Suppose s = 0.15, Y = 4200, K = 6100, n = 0.03, g=0.03 and δ= 0.10. This makes national saving smaller than steady-state investment, so that the amount of capital per effective worker will be falling.

7) In the graph of the Solow growth model, at any point to the left of the steady-state intersection we have national saving per effective labour greater than steady-state investment per person, causing (K/AL) to increase.

8) In the Solow growth model, an increase in the marginal propensity to consume shifts the steady-state investment line downward with the implied change in the capital stock resulting in a higher standard of living in the long run.

If an economy can raise its annual real GDP growth rate from 3.8 percent to 4.5 percent, its real GDP doubling time is reduced by 15 years.

2) Suppose that the government passes a law requiring households to increase savings 10% above previous levels. According to Solow's growth theory, in the long run output per capita will grow less rapidly.

3) If an economy has a real GDP doubling-time of 48 years, this will be increased to 56 years if annual GDP growth is reduced by 3.2 percentage points.

4) If K = 3000, n = 0.02, and depreciation, δ= 0.04 and g=0.03, then investment of 320 will hold (K/AL) constant.

The model standard error is 9.18. How do you use this estimation for business decisions?

6. Check the significance of this model base on a computer printout as well as a manual process at a 95% significant level.

7. Construct the simple demand function for this model and graphically show it.

8. Construct the total revenue function (TR) and determine total revenue maximize output level.

9. Measure and interpret 0.5 elasticity of demand and advertising elasticity of demand.

PRODUCTION FUNCTION IS

Q=200√L√K

PL=500

PK=800

TOTAL OUTLAY, C=5000

1).Determine lost minimizing combination of Labour and Capital

2.What is the cost minimizing output level

3.Construct the equilibrium for isoquant

4.if selling price of this product is Rs.200 per unit, what would be the profit or loss of this organization