Macroeconomics Answers

Based on the material of the chapter “money growth and inflation” of your text book explain with the help of diagrams how inflation starts in an economy? Why multinational companies feel unsafe to invest in those countries that have high inflation rate? Write your answer the light of your text book materials

(Chapter 31: Money Growth and Inflation)

 Which one of the following policy actions in the IS-LM model is appropriate if the 

objectives are to simultaneously decrease the budget deficit and increase the level of output 

and income?

1. Calculate GDP and National Savings from the following data:

1. Compensation of Employees=7937
2. Income of self-employed=1006
3. Rental Income=110
4. Corporate profits=1260
5. Indirect business taxes=994
6. Consumption of fixed capital=1747
7. Factor income received from rest of the world=709
8. Payment of factor income to rest of the world=567
9. Consumption=9765
10. Government Spending=900

In the fall of the year 2021, Narnia witnesses exceptionally good weather conditions which are so conducive to agriculture on the magical lands, that the average food grain harvested in summer 2021 is substantially higher than the usual amount. What is your prediction for Narnia’s fawn-society in terms of their standards of living (which depend on average food-grain produced in the economy) and population? Is this in sync with the Malthusian hypothesis about standards of living? 

Explain your prediction and how these relate to the Malthusian prediction, as well as the reason that drives these similarities or differences.

Consider a Keynesian model:

Full employment output = R100 million

Tax rate = 0,25

Investment = R40 million

Autonomous consumption = R30 million

Marginal propensity to consume = 0,8

The value of the multiplier is …

[1] 2

[2] 1.67

[3] 2.5

[4] 4

The equilibrium level of income is …

[1] R70 million.

[2] R175 million.

[3] R280 million.

[4] R140 million.

To bring about full employment, government spending should be …

[1] -R30 million.

[2] -R72 million.

[3] R30 million.

[4] R75 million.

Does the Keynesian explanation of the relationship between output and price-level hold in the long run 

equilibrium?

What might Keynesian policy maker recommend to bring the economy back to original equilibrium?

Will this policy be successful?

Will a classical policy maker agree with Keynes recommended policy? Explain.

Given the following data calculate the net domestic products at the market price

Gross national product at market prices =US$ 85,000

Depreciation=US$ 3,000

Net factor income from abroad =US$ 2,000

Suppose following the lockdown the stock market declines sharply, reducing consumers’ wealth, explain with the help of a diagram what will be the short-run and long-run effects on output and the price level, assuming policymakers take no other action. [4 marks]

Implications of risk and uncertainity for the theory of firm