Macroeconomics Answers

How do the macroeconomics indicators link with the circular flow, individually?

1)     Assume the logarithmic transformation f a utility function, for the consumption of two commodities is given by

ln U = ln4 + 0.5ln X + 0.25lnY

(a) if the price of X is GHS2.50 and that of Y is GHS4.00, calculate the optimal combination for an income of GHS50.00.

b)  Determine and interpret the value of the Lagrange multiplier.

A monopolist's demand function is P = 1624 - 4Q, and its total cost function is

TC = 22,000 + 24Q -4Q2 + 1/3 Q3, where Q is output produced and sold.

i. At what level of output and sales (Q) and price (P) will total profits be

maximized?

ii. At what level of output and sales (Q) and price (P) will total revenue be

maximized?

iii. At what price (P) should the monopolist shut down?

Use the information below to answer questions 3.27 to 3.30.

Autonomous consumption = R1000 Autonomous investment = R5000 Autonomous government spending = R20000 Net exports = R4000 Marginal propensity to consume = 0.7 Tax rate = 25%

25. The equilibrium level of income is …

[1] R39900 [2] R30000 [3] R63000 [4] R99900

26. If the tax rate rises to 30% and government spending rises to R25000, ceteris paribus, what is the new equilibrium income?

[1] R63000 [2] R63400 [3] R70000 [4] R68600

22.In the Keynesian model, an increase in interest rates will result in …

[1] a downward movement along the investment curve. [2] an upward shift of the aggregate spending curve. [3] a downward shift of the aggregate spending curve. [4] a leftward shift of the money market curve

Use the information below to answer questions 3.27 to 3.30.

Autonomous consumption = R1000 Autonomous investment = R5000 Autonomous government spending = R20000 Net exports = R4000 Marginal propensity to consume = 0.7 Tax rate = 25%

23. Autonomous spending is …

[1] R25000 [2] R26000 [3] R22000 [4] R30000

24. The value of the multiplier is …

[1] 3.33 [2] 2.1 [3] 1.33 [4] 1

19. How is the multiplier affected by a decrease in leakages from the Keynesian model with a government?

1] it decreases [2] it increases [3] no change [4] multiplier is not affected 

.

20. In the Keynesian model, expansionary fiscal policy will result in a(n) …

[1] increase in inventories. [2] decrease in total income. [3] increase in total spending. [4] decrease in the value of the multiplier.

21. Which one of the following authorities is responsible for fiscal policy in South Africa?

[1] The South African Reserve Bank (SARB) [2] The National Treasury [3] South African Revenue Services (SARS) [4] Statistics South Africa (STATSSA) A Y 45₀ A’ A 0 𝐴ҧ80

22.In the Keynesian model, an increase in interest rates will result in …

[1] a downward movement along the investment curve. [2] an upward shift of the aggregate spending curve. [3] a downward shift of the aggregate spending curve. [4] a leftward shift of the money market curve

4. How is the multiplier affected by a decrease in leakages from the Keynesian model with a government?

1] it decreases [2] it increases [3] no change [4] multiplier is not affected 

1.In the Keynesian model, GDP is determined by...

[1] level of taxes. [2] price level. [3] level of aggregate spending. [4] level of aggregate supply.

2. At points above the 45° line in the aggregate spending function diagram...

[1] aggregate expenditure is in equilibrium. [2] aggregate spending is less than GDP. [3] aggregate spending is greater than GDP. [4] aggregate spending is equal to GDP

3. Which one of the following statements is incorrect regarding the Keynesian model with the government and foreign sector?

1] The change in the level of exports is dependent on the exchange rate, among others. [2] The change in the level of imports is dependent on the level of domestic income. [3] An increase in the marginal propensity to import would increase imports. [4] The greater marginal propensity to import is, the bigger the multiplier.

8.Which of the following factors will not affect the size of the multiplier?

[1] marginal propensity to consume [2] investment spending [3] marginal propensity to import [4] tax

9. What is the aggregate spending equation if the saving function is S = -1000 + 0.25Y and autonomous investment spending is 100?

[1] A = 1000 + 0.25Y [2] A = 1000 + 0.75Y [3] A = 1100 + 0.25Y [4] A = 1100 + 0.75Y

10. Which one of the following statements is correct given that C= 400 + ¾ Y and income level is 1000?

[1] total consumption is R 400 [2] total consumption is R1150 [3] aggregate spending is R 1000 [4] marginal propensity to save is 0.75