Macroeconomics Answers

Suppose that the net investment flow is described by the equation I(t)=3t1/2 and that the initial capital stock, at time t = 0, is K(0). What is the time path of capital K?

If net investment is a constant flow at I(t)=1000 (Ghana Cedis per year), what will be the total net investment (capital formation) during a year, from t = 0 to t = 1?

If I(t)=3t1/2 (thousands of Ghana Cedis per year) – a nonconstant flow – what will be the capital formation during the time interval [1, 4], that is, during the second, third, and fourth years?

i)  Show that the Cobb-Douglas production

Q=AKαL1-α

       where Q is total output, K is capital stock, L is labour stock and A and are positive   constants, exhibit constant returns to scale.

    (ii) What returns to scale does Q=5K0.25L0.6 exhibit? 

A.   Now, assuming the economy is open with government (G) participation and  external trade which is summarized as follows; export(X)= 100-0.10Y, import(M)=50, G=100, Taxes(T)= 100 and C, I, M_S, M_t, M_z= speculative money demand

What exchange rate policy should government implement in (iii) to enhance income and why?   

A.   Now, assuming the economy is open with government (G) participation and  external trade which is summarized as follows; export(X)= 100-0.10Y, import(M)=50, G=100, Taxes(T)= 100 and C, I, M_S, M_t, and M_z the same as defined in (a) above. Calculate;

   i.           The equilibrium income and interest rate in this new economy.         

  ii.           The level of C, I, M_t, and M_z when the economy is in equilibrium      

A. Given that in an economy, , I , M_S =300, M_t = 0.4Y, and M_z=125-200r where, Y= income, C= consumption, I= investment, M_S= money supply, M_t= transactional-precautionary money demand, M_z= speculative money demand and r= interest rate. Calculate;

     i.           The equilibrium level of income and interest rate in this economy.      (2 marks)

ii. The level of C, I, M_t, and M_z when the economy is in equilibrium

Discuss whether government intervention in the economy is ever justified by the implementation of measures to fight against COVID-19 pandemic in Ghana

With the aid of diagrams, brieftly explain the effectiveness of fiscal and monetary policy under fixed exchange rate system with perfect capital mobility within the IS-LM-BOP framework

With the aid of a diagrams, briefly explain how interest elasticities and demand for money affect the slope of the IS and the LM curve

in the labour market, explain how the rate of unemployment is related to the bargaining power and nominal wages