Macroeconomics Answers

Is it justifiable to exclude homemakers’ value creation from national income?

“The circular flow of income is an economic model which exhibits the foundation
of the transactions that build an economy.”— Discuss the statement and show
how this model works in a three-sector economy

What will be the money supply ,if the central bank purchases a government bond from an individual who deposits all the money that has been received from the sale in the bank

“Increase in the tax rate causes shift in the position of the IS curve.”— Discuss the statement with arguments.

“The circular flow of income is an economic model which exhibits the foundation of the transactions that build an economy.”— Discuss the statement and show how this model works in a three-sector economy.

Is it justifiable to exclude homemakers’ value creation from national income?

Explain the impact of expansionary fiscal policy on IS curve.

YEAR 1 (R-Billion) YEAR 2 (R-Billion)

Investment 200 220



Saving 180 190

Export 100 110

Imports 120 140

Government Expenditure 150 160

Taxation 150 160

Equilibrium National Income 1 800 2 000



(a) Calculate the value of the multiplier for this economy.

(b) Should the full employment level of income be R-B2 255, by how much should government change its spending to reach this level of income during the next year given the multiplier has not changed.

(c) Evaluate whether or not this policy approach is effective in real life in achieving the desired level of GDP.

On the x-axis of the graph , are the numbers representing millions or billions?