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Objectives of monetary policy. How these objectives could to achieve the macroeconomic goals of each country
Suppose there are two groups of people in an economy, with their respective consumption function.
CA=100+0.5YA
CB=150+0.75YB
planned investment 200.Where Ci and Yi are respectively consumption and income level
for the ith group (for all i=A,B). Suppose each group gets 50% of total GDP in the economy.
Determine the equilibrium level of income. Considering the equilibrium income as the initial income, a lumpsum tax T is imposed on Group A and the same amount is given as a transfer to Group B.
Now determine planned consumption, planned savings , planned aggregate Demand and the Actual Investment as the initial level of income
Use specifically the Solow growth model to discuss the implications of this pandemic
on the prospects of long-run economic growth for South Africa.
Credit cards are NOT considered money because:
The COVID-19 pandemic has been a humanitarian and economic tragedy .
Further explanations of the following :
(1) Supply-side effects (lower labor supply and higher real wages),
(2)demand-side effects (lower consumption),
(3)human capital effects (poor health and education),and
(4) social trust effects are all examples of supply-side effects (between individuals and to your political institutions)
Q) a. What is Phillips curve? Draw the short-run Phillips curve and the long-run Phillips curve. Explain why they are different. [2 marks]
b. Suppose the economy is in a long-run equilibrium. Suppose a wave of business pessimism reduces aggregate demand. Show the effect of this shock on your diagram from part (a). If the RBI undertakes expansionary/contractionary monetary policy, can it return the economy to its original inflation rate and original unemployment rate? (b) What is sacrifice ratio? [5 marks]
Q. In order to promote digitalization of Indian banking system, the government encourages banks to open more ATMs in rural India, making withdrawals from bank accounts more convenient. Assume the RBI does not change the money supply. [4 marks]
a) According to the theory of liquidity preference, what happens to the interest rate, aggregate demand? Draw a diagram
b) If the RBI wants to stabilize aggregate demand, how should it change the money supply?
Q) a. Suppose that there is an excess supply of economics professors. Should universities necessarily reduce salaries? What does standard economic theory suggest? What does efficiency-wage theory suggest (Explain with diagram). [4 marks]
b. Briefly describe how labor unions can affect wages in non-unionized industries. [3 marks]
. In a closed economy, GDP is $1000, government purchases are $200, and consumption is $700. If the government has a budget surplus of $25, what are investment, taxes, private saving, and national saving? Explain with equations. [4 marks]
Q) Price of petrol was Rs. 60 per litre in 2015 and Rs. 100 per litre in 2021. The average wage in manufacturing was Rs. 240 per hour in 2015 and 300 in 2021.
a. By what percentage did the price of a litre of petrol rise? [3 marks]
b. By what percentage did the wage rise? [3 marks]
c. In each year, how many hours does a worker have to work to earn enough to buy 10 litres of petrol? [3 marks]
d. Did workers’ purchasing power in terms of petrol rise or fall? [3 marks]
