Macroeconomics Answers

Define iso - quant and iso- product curve. How do you find the optimum combination point in case of factor- product, factor -factor and product – product relationship? Explain in brief.

Explain how each of the following developments would affect the supply of money, the demand for money, and the interest rate. Illustrate your answer with diagrams. 

a) BNM’s securities traders buy securities in open-market operations. 

b) An increase in credit-card availability reduces the cash people hold.

c) BNM reduces banks’ reserve requirements. 

d) Households decide to hold more money to use for holiday shopping. 

e) A wave of optimism boosts business investment and expands aggregate demand. 

How can an oligopoly cause market failure

In the islm model suppose the demand for investment became less responsive to change in roi what will be the impact on effectiveness of fiscal policy

Explain the cost of unexpected inflation

Derive the demand for money using money demand and Money supply curve show how releif of interest with a decrease in money supply

using quantity theory of money and Fischer equation explain how money growth affect the nominal interest rate

A term where businesses do not maximize output from the given input

Discuss in detail the macroeconomic circular flow diagram. Substantiate your answer with the aid of a diagram.

The following equations describe an economy (think of C, I, G, etc as being measured in billions and i as a percentage; a 5 percent interest rate implies i = 5) 

C = 0.8 (1 – t) Y

t = 0.25

I = 900 – 50i

G = 800

L = 0.25Y – 62.5.i

M / P = 500

1. How does an increase in the tax rate affect the IS curve?

How does the increase affect the equilibrium level of income?

2. Show that a given change in the money stock has a larger effect on output the less interest sensitive is the demand for money.

(b) How does the respond of the interest rate to a change in the money stock depend on the interest sensitivity of money demand?