Macroeconomics Answers

Calculating the changes in the after-tax interest rates if the tax rate on interest income changes from 30

Percent to 20 percent. Let the nominal interest rate is 5 percent per year and expected inflation rate is 2

Percent per year.

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)

Conclusion As a response to Covid-19 the SARB cut its benchmark interest rate to a low record. In the last meeting held on the 25^th March 2021, the South African reserve bank’s Monetary Policy Committee (MPC) announced that interest rates would remain stable at 3.5 percent and the prime lending rate at 7 percent. This was largely in line with Economist's expectations.

how public policies such as 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.

    I.         Given Q = 500 – 3P + 0.02Y

Where P = 25, Y = 750

Find a) Price Elasticity of Demand   b) Income Elasticity of Demand

A count's balance of payments

1)   Explain the difference between inside lags and outside lags

2)   Explain the components of inside lags

3)   Explain the components of the outside lags

4)   Illustrate and explain how a policy could have destabilizing effects

In a recent article on BusinessLive, Duma Gqubule argues that South Africa does not have a real 

central bank. He criticises the conduct of monetary policy and puts forward a range of proposals 

under the umbrella term monetary finance. 

1. Compare his proposals to what you have learned about monetary policy in Chapter 9. You 

can compile a summary table as follows. (12)

The SARB’s way Gqubule’s proposals

The objective of monetary policy

The targets

The way in which policy is 

conducted, and instruments used

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

In a recent article on BusinessLive, Duma Gqubule argues that South Africa does not have a real central bank. He criticises the conduct of monetary policy and puts forward a range of proposals under the umbrella term monetary finance.

1. Compare his proposals to what you have learned about monetary policy in Chapter 9. You

can compile a summary table as follows.

1) The SARB’s way:

The objective of monetary policy

The targets

The way in which policy is conducted, and instruments used

2) Gqubule’s proposals

The objective of monetary policy

The targets

The way in which policy is conducted, and instruments used. (12)

        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)

a) Consider a couple whose behaviour follows the unitary household model. Their preferences can be represented by the utility function: U(C^M; C^H) = min (C^M, C^H), where C^M, denotes market goods and C^H denotes home production. Each spouse can work up to 50 hours per week, and those 50 hours can be divided between market work and home production. Joe and Anna are each paid £20 per hour for market work. Joe produces £20 of home production per hour, while Anna produces £30 per hour of home production. How many hours are each of the spouses allocating to home production and market work?

b)  Suppose that Anna is offered a pay raise, so that her hourly market wage increases to £25, and nothing else changes. Will that change the identity of the spouse who works more hours on the market? Explain your answer. [Hint there is no need to calculate the full solution to this case]