Macroeconomics Answers

What is scarcity

what is national income?

What are the three key facts about economic fluctuations? Explain briefly. [3 marks]

What is meant by potential GDP? How is it different from actual GDP?

Explain by means of a graph how government can intervene in the market using subsidies as a means to increase output

For Toucan industries, the following relationships exists: each unit of output is sold for $35, the fixed costs are $160,000 and variable cost are $15 per unit.

A)  What is the firm’s gain or loss at sales of 6000 units and 9000 units?

B)   What is the break-even point? (Illustrate by means of a chart/graph)

C)   What is toucan’s degree of operating leverage at sales of 6000 units and 9000 units?

D)  What happens to the break-even point if the selling price rises to $40? What is the significance of the change to financial management? (Illustrate by means of a chart)

E)   What happens to the break-even point if the selling price rises to $40 but variable costs rise to $20 per unit?

Consider a 2-period economy populated with consumers that have the same income and the same preferences. There is also a government whose objective is to spend 60 in period 0 and 150 in period 1. This government can issue bonds in period 0. Each bond pays an interest rate r. Consumers can also issue bonds at the same interest rate. Consumers' optimal decisions, given r, imply that aggregate consumption C0* is equal to 2/3(Yo – To) + 2/3(Y1 – T1)/(1+r). Suppose that Yo = 300 and that income is expected to remain at this level in period 1.

A major recession begins in period 0. As a result, economic activity falls by 18 in period 0. National income is expected to fall by 20 in period 1. Consumers believe these economists.

a) Use a graph to explain why the equilibrium interest rate r falls from 0.25 to 0.2 in period 0 because of this recession.

c) Economists were wrong. The recession does not continue into period 1 so that y1 remains at 300. How does this new information affect consumers? Explain.

Compare and contrast South African government expenditure trends with other global economies over the past 10 – 15 years

What is demand

What is Demand pull inflation