Macroeconomics Answers

Ahmad travel for islamabad by using his personal car but increase the prices of petrol and forced him to use local van discus it

Given the following information, find

(a) Equilibrium level of GDP

(b) Marginal propensity to save

(c) Marginal propensity to spend

(d) Net Export function

C = 100 + 0.6YD

I = 500 crore

G = 800 crore

T = 200 crore

X = 200 crore

M = 50 + 0.3Y

Also, explain the Net Exports function using diagram & give reason for its negative

slope. Answer briefly, why does the Net Exports function shift?

1. If a consumer increases her quantity of ice cream consumed by 100% when her

income rises by 25%. Calculate her income elasticity of demand for the ice cream and

interpret the result. (2marks)

2. If Qs = -20 + 10p, and Qd = 400 - 20p, what is the equilibrium price and quantity? (2

marks)

3. Assume you are managing a food processing plant in Ethiopia. The demand function

for one of your product is given as Qd=50-2p. (8 marks)

a) Find the point price elasticity if price is 15 ETB? Is it elastic or inelastic?

b) How do you interpret the elasticity result?

c) In order to get more revenue what will be your recommendation. Is it to increase

price or decrease price? Why?

d) Describe at least four determinants of the price elasticity demand for the food

product?

For a monopolist firm the demand and the total cost functions are given as Q = 20-

0.5P and TC= 4Q2-8Q+15, respectively. (8 marks)

Find

a) the optimum quantity and the optimum price level

b) the profit/loss on these levels

c) at what price should the monopolist shut down?

d) Show the economic profit (loss) of the firm in a graphic representation

The primary effect of an increase of repo rate is decrease in Y and a positive effect on the current account

Consumer surplus indicates that...

a) more will be demanded at lower prices than at a higher prices.

b) it is impossible to increase consumer well-being by changing the way in which income is spent.

c) consumers often get more value from a good than is represented by the price they pay for that good. d) the allocation of resources is decided by the interaction of buyers and sellers. 

Suppose one thousand (1000) units of products A are produced by XYZ limited and the quantity demanded for the product is two thousand (2000) units. All other things remaining constant a Ghc 24 Change in the price of product A results in a change in quantity demanded and supplied and 6 and 4 units respectively.

 XYZ limited has a workforce of people who pay income tax of Ghc200 each to the government.

A.  

Calculate the equilibrium price (In Ghc) and equilibrium quantity

B.

Suppose government introduces a Subsidy of Ghc10 on each unit of product A produced, calculate the new equilibrium price and que equilibrium quantity.

C.

Graphically indicate how much of the Subsidy will be received by the producer and consumer respectively. 

D.

How much revenue is the government going to forgo in the form of subsidy?

Which of the following statements is incorrect? (4 marks) a) The three major flows in the economy are total production, total income and total spending. b) There are two sets of markets in a simple economy: goods and services markets and factor markets. 1.8c) In the simple circular flow of economic activity, real" flows of goods and factors, and financial flows, move in opposite direction. d) Firms are buyers in the goods markets and sellers in factor markets, while households are buyers in factor markets and sellers in goods markets. 

When the price of commodity B rises by 10%, the total revenue received by firms that sell

commodity B rises by 5%. The demand for commodity B is therefore...

a) perfectly elastic.

b) unitary elastic

c) inelastic

d) elastic

an increase in supply