Macroeconomics Answers

why flexible labour markets are such an important element in supply side policies?

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 monetary policy influences aggregate demand and how these can be used to expand the economy

In response to unemployment challenges in an economy, the government put in place several macroeconomic policies. Discuss at a theoretical level how public policies such unemployment benefits and tax incentives can affect the employers, government, and the level of unemployment, taking into account the age groups, skills endowments and substitution effects of the various workers in an economy

explain the relationship between marginal cost and average total cost

1. According to the Department of Statistics Malaysia (DOSM) in 2020, the production to five economics sectors namely services, manufacturing, agriculture, mining, and quarrying; and construction registered a contraction with a highly challenging domestic operating environment and lower global demand in response to Covid-19 Pandemic as shown in FIGURE 1. Therefore, it is putting into pressure especially to the Small-Medium Enterprises (SME) in Malaysia for making pricing decision on its products or services in relations to a firm's total revenue. Evaluate THREE (3) effects on a firm's total revenue in response between percentage change in quantity demanded for a goods or services with respect to the percentage change in price

based on specific economics sectors.

PRODUCTION

MINING QUALIVING

-10.6% -0.6%

SERVICES

-5.5% 6.2%

MANUFACTURING

-2.6% 3.8%

AGRICULTURE

-2.2% 2.0%

CONSTRUCTION

-19.4% 0.4%

FIGURE 1: ECONOMICS SECTORS PRODUCTION IN MALAYSIA

[60 marks]

Covid-19 lockdown as a supply shock shown on the AD-PC model

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

2. 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. (6) (all on a single graph, with explanations, please)

Use the following data to answer the below questions.

Employee compensation + Operating surplus + Mixed revenues: $ 65,395 million
Indirect taxes: $ 10,983 million
Gross investment: $ 18,221 million
Net investment: $ 3,706 million
Gross fixed capital formation: $ 16,868 million
Consumption + Gross fixed capital formation + Government spending on goods and services: $ 96,900 million
Government spending on goods and services: $ 24,655 million
Share of exports in GDP: 54%
Grants: 500 million
Transfer payments: 494 million

Use the data to answer the following questions.


A) The allowance for capital consumption = $ millions


B) Nominal GDP = millions $


C) Inventory change = $ millions


D) Household consumption = millions $


E) Exports = millions $


F) Imports = millions $


G) Net exports = $ millions


H) If the real GDP in the same year was $ 80,239 million, we can conclude that the price level in the economy would be equal to =


I) What is the growth in the general price level between the reference (base) year and the year in question =%

Stores in Vermont buy strawberries from Quebec. What would be the impact on the Quebec economy?

 A. Consumption, nominal GDP, and real GDP increase.
 B. Exports increase, nominal GDP increases, and there is no effect on real GDP.
 C. Exports, nominal GDP and real GDP increase.
 D. Exports increase, there is no effect on nominal GDP, real GDP increases.
 E. Imports, nominal GDP and real GDP increase.
 F. Investment, nominal GDP and real GDP increase.