Macroeconomics Answers

Suppose all customers visiting the local bank have to take a random number and wait in a line. There are 200 customers in the bank in any given day, however only 85 percent of the customers are served. The length of the time customers must wait to see a Bank Teller is uniformly distributed between 50 minutes and 4 hours. a) What is the probability that a customer would have to wait between 20 minutes and 2 hours? b) What is the probability that a customer would have to wait between 50 minutes and 3 hours? c) Compute the expected waiting time.d) Compute the standard deviation of the waiting time.

A farmer grows a kilogram of wheat and sells it to a Miller for $1.00. The Miller turns the 

wheat into flour and then sells the flour to a baker for $3.00. The baker uses the flour to 

make bread and sells the bread to an engineer for $6.00. The engineer eats the bread. What is 

the value added by each person? What is GDP?

Suppose a survey by the Department of Roads in 2019 revealed that 60% of the vehicles travelling on Suva-Nadi Highway, where speed limits are posted at 80 kilometres per hour are found to be exceeding the limit. Suppose you randomly record the speed of 10 vehicles travelling on the highway as part of your internship. The sample size of the entire survey is not disclosed to you. Compute the following probabilities. Showing all working. a) P (X = 2). b) P (X = 5). c) P (X = 10).

A researcher classifies students according to their residence (urban or rural) and hours of paid work per week. He randomly selects one student. Residence 0 1–10 11–20 Over 20 Urban 0.06 0.20 0.15 0.06 Rural 0.12 0.18 0.20 0.03 a) If the student selected is from a rural region, what is the probability that he works between 1 and 10 hours a week? b) If the selected student works more than 20 hours a week, what is the probability that the student resides in an urban region?

The following data represents the age (in years) of a sample of 25 members of parliament in a South Asia. 20 40 56 23 42 61 27 42 64 28 43 31 44 33 44 35 47 35 48 36 49 38 52 39 53 a) Compute the coefficient of variation. b) Compute the range approximation to the standard deviation of the data.

A simple closed economy with an mpc equal to 0.5. Investment spending has suddenly fallen, reducing aggregate demand and output to a level that is 100 million below Y*.

                   i.           If the government decide to try to get the economy back to full employment using only an increase in government spending, by how much would G need to be increased?

Briefly explain the meaning of each equation in the above model. What are the values of d Y C , r I , LY and 

S Nw . Give economic interpretation of each.

Q.1 Consider the following information about a hypothetical economy:

1. Y = A ( ) 0.025K − 0.5N N

2. A=2/3

3. K = 2000

4. N^s=-18+(18/5)w

5. C=200+(2/3)(Y-T)-300r

6. T=-75+(1/4)Y

7. I =100−100r

8. G =100

9. L = 0.5Y − 200i

10. M = 6300

11. 0.10

Now using this information, answer the following: 

(g) If government wants to attain same output change as in part (e) using fiscal policy rather than the 

monetary expansion, by what amount should it change its policy instruments. Analyze all possible options 

the government may exercise. What will be the effect of such policies on all endogenous variables? 

(h) Compare the equilibrium positions in (d) and (g) in one graph indicating all points. 

Q.1 Consider the following information about a hypothetical economy:

1. Y = A (0.025K − 0.5N) N

2. A=2/3

3. K=2000

4. N^s=-18+(18/5)w

5. C=200+(2/3)(Y-T)-300r

6. T=-75+(1/4)Y

7. I =100−100r

8. G=100

9. L = 0.5Y − 200i

10. M=6300

11. π^e=0.10

Now using this information, answer the following: 

(e) Beginning from the initial classical equilibrium, suppose that the central bank increases the money supply 

by 420 while price remains fixed at its initial long run equilibrium level. What will be the impact of this 

policy on all endogenous variables in short run and long run? 

(f) Compare the equilibrium positions in (d) and (e) in one graph indicating all points. 

What property is shared by all points along the LM schedule? Along the IS schedule?