Macroeconomics Answers

Explain the two characteristics of Public goods; a) Non-rivalrous and b) low degree of

excludability. How does the Idea behave like a public goods? Explain the problems

associated with the nature of Data on Ideas. (Romer Model)

“Among countries that have the same steady state, the convergence hypothesis should hold:

poor countries should grow faster on average than rich countries”. Explain with graphs and 

examples. (Romer Model)

Explain why an increase in saving in the Solow model has a level effect but not a growth

effect.

A) Discuss the steady state condition in the Solow model with population growth and no

technological progress.

B) In the Solow model with no population growth and no

technological progress, explain the golden rule level of consumption. Use a diagram to

discuss your answer.

C) When it would be possible to increase output per unit of labour

even at the steady state? Discuss.

What constitutes the knife-edge instability problem in the Harrod model? Give a formal 

proof and illustrate with an example.

As of September 2021, the population (16+ years of age) in the U.S. is 263

million people. The labor force participation rate is 61%, and the unemployment rate

is 4.8%. What is the employment level?

4. You win $100 in a basketball poo. You have

a choice between spending the money now or

putting it away for a year in a bank account

that pays 5 percent interest. What is the oppor-

tunity cost of spending the $100 now? ANoLW

How Total revenue changes with change in output when Marginal Revenue is positive

The economy is at full employment. Now the government wants to change the composition of demand towards investment and away from consumption without, however, allowing aggregate demand to go beyond full employment. What is the required Policy mix? Use the IS-LM diagram to show your policy proposal.

1. Explain how fiscal policy can use both policy instruments at their disposal to stimulate an economy?
2. Based on your answer (1), illustrate and explain by aid of the AD-AS model what the identified policy employment by Fiscal Authorities will have on the general price level and the level or real production and income in the economy.