Macroeconomics Answers

The isoquants for cocoa and coffee (the only two commodities produced in the Ghanaian economy) are given by X1, X2, X3 and Y1, Y2, Y3, respectively and their combinations are represented in Table 1 below. Assuming that only 18L and 12K are available for the production of cocoa and coffee. 

X1

X2

X3

Y1

Y2

Y3

L

K

L

K

L

K

L

K

L

K

L

K

3

10

7

9

9

10

3

6

9

9

13

10

4

5

8

7

12

8

6

4

10

5

14

7

6

2

11

4

15

7

15

2

13

3

16

5

Draw the Edgeworth box diagram for cocoa and coffee. 

Label the point where both commodities cross each as R

Starting at the point where X1 crosses Y1, show that the output of cocoa, coffee, or both can be increased with the given amounts of 18L and 12K. 

Derive the contract curve and indicate what it means.

What is the equilibrium condition that holds along the production contract curve and express it in an algebraic form?

What is the value of the MRTSLK?

a)     Suppose that UNZA is a country with a population of 321,166,640 people of which the number of unemployed people is 121,166,640. The employment rate in this economy is 0.104, and the labour force participation rate 72.5%.

a)     Suppose that UNZA is a country with a population of 321,166,640 people of which the number of unemployed people is 121,166,640. The employment rate in this economy is 0.104, and the labour force participation rate 72.5%.

a)     Discuss whether minimum wage laws are good or bad for the economy.

a)     You are given the following balance sheet of a commercial bank:

Assets

Liabilities

Reserves                    K 1,500

Loans                       K 3,500

Initial Deposit           K 5,000

Assume required reserve ratio is 10 percent and that 100% of all the loans are deposited as new deposits.

                 v.           At the end of the credit creation process, what will be the final value of the deposits?

a)     You are given the following balance sheet of a commercial bank:

Assets

Liabilities

Reserves                    K 1,500

Loans                       K 3,500

Initial Deposit           K 5,000

Assume required reserve ratio is 10 percent and that 100% of all the loans are deposited as new deposits.

               iv.           By how much can the bank increase its loans?

If investment is very interest elastic most of an income tax rate cut will be crowded out therefore central bank should always supplement a tax cut with an increase in money supply”. Comment on this statement with the help of IS-LM diagram and explain the adjustment process. Would your answer change if the price lend were allowed to change. Explain

a)     A hypothetical economy is given by the following identities:

C = 3000

I = 2000

G = 2500

T = 0.2Y

MPC = 0.5

X=6500

Z=5500 + 0.2Y

               iv.           Using initial values, what will the new level of Y be if the tax rate rises to T=0.3Y?

                 v.           Calculate the budget deficit/surplus using the initial values.

               vi.           Calculate the trade balance using the initial values

a)     A hypothetical economy is given by the following identities:

C = 3000

I = 2000

G = 2500

T = 0.2Y

MPC = 0.5

X=6500

Z=5500 + 0.2Y

                 ii.           If investment expenditure decreases by 100, what will be the change in Y?

               iii.           Using the initial values, if G increases by 300 what will be the new level of Y?

a)     A hypothetical economy is given by the following identities:

C = 3000

I = 2000

G = 2500

T = 0.2Y

MPC = 0.5

X=6500

Z=5500 + 0.2Y

                   i.           Find the equilibrium level of income.