Macroeconomics Answers

Explain the keynesian theory of employment with income and expenditure approach.

4. Which of the following would not necessarily enhance economic growth in South Africa?

a) Technological improvements.

b) Increased labour productivity through on-the-job training.

c) Higher levels of net investment in the economy.

d) Higher levels of government spending that raise local interest rates.

what determines consumption, investment, government spending and net export?

How we compute consumption

Suppose that an economy has the Phillips curve π = π−1 − 0.5(u − un ) and that the natural rate of unemployment is given by an average of the past two years’ unemployment: un =0.5(u−1+u−2)

Suppose that the Bank of Canada follows a policy to reduce permanently the inflation rate by 1 percentage point. What effect will that policy have on the unemployment rate over time?

What are the economic contributions of transport investment?

Questions A [30 marks]   

Assume the economy is in a recession. Explain how each of the following policies would affect consumption, investment and national income (GDP). In each case, indicate any direct effects, any effects resulting from changes in the macroeconomic variables and the overall effect in the economy. If there are conflicting effects making the answer ambiguous, say so. 

1. How fiscal policy influences aggregate demand and how these can be used to expand the economy? [15 Marks] 
2. How monetary policy influences aggregate demand and how these can be used to expand the economy? [15 Marks] 

Basic food supplies for disabled persons are to be provided by the government even when they do not provide any labour input to the production process.

True/False –

Why –

Represent Gqubule’s reasoning using the AD’-PC model from chapter 7:

2.1 The Covid-19 lockdown as a supply shock only. (6)

2.2 His monetary policy proposals. (6)

2.3 His proposals for what to do when too much money is created.

Assume the economy is in a recession. Explain how each of the following policies would affect consumption, investment and national income (GDP). In each case, indicate any direct effects, any effects resulting from changes in the macroeconomic variables and the overall effect in the economy. If there are conflicting effects making the answer ambiguous, say so.

a)    How fiscal policy influences aggregate demand and how these can be used to expand the economy? [15 Marks]

b)    How monetary policy influences aggregate demand and how these can be used to expand the economy? [15 Marks]