Macroeconomics Answers

What are the 5 main main macroeconomics objectives?

 In the endogenous growth model of Romer (1990), workers can, without costs,

shift between the production of inputs and R&D. Imagine instead that the fraction

of researchers in the economy is a fixed parameter that cannot be changed. Then,

conjecture what happens to the responsiveness of the growth rate in the economy to

the degree of substitutability among the varieties of ideas, φ.

Uber has a monopoly on ride-sharing services. In one town, the demand curve on weekdays is given by the following equation: P = 50 - Q. However, during weekend nights, or peak hours, the demand for rides increases dramatically and the new demand curve is P = 100 - Q. Assume that marginal cost is zero.

a. Determine the profit-maximizing price during weekdays and during peak hours. [4]

b. Determine the profit-maximizing price during weekdays and during peak hours if MC = 10 instead of zero. [4]   

c. Draw a graph showing the demand, marginal revenue, and marginal cost curves during peak hours from part (b), indicating the profit-maximizing price and quantity. Determine Uber’s profit and the deadweight loss during peak hours, and show them on the graph. [8]

According to supply side theorists, the aggregate supply curve will shift to the right when?

Use the saving-investment diagram to analyze the effects of the following on national saving, investment, and the real interest rate. Explain your reasoning.

a. Consumers become more future-oriented and thus decide to save more The government introduces an investment tax credit (offset by other types of taxes, so total tax collections remain unchanged).

b. A large number of accessible oil deposits are discovered, which increases the expected future marginal product of oil rigs and pipelines. It also causes an increase in expected future income.

The recent global development of Russia invading Ukraine has led to USA and European countries imposing sanctions on Russia. Given that Russia is a major player in OPEC, discuss the implication of this in South African economy.

Discuss the impact that the war in russia and ukrain had on economic development of the globe and in South

Africa.

A tax system is progressive if …

The first principle of economics discussed in Chapter 1 of Mankiw’s book is that

people face trade-offs. Use a production possibilities frontier to illustrate society’s trade-

off between two “goods”—a clean environment and the quantity of industrial output.

What do you suppose determines the shape and position of the frontier? Show what

happens to the frontier if engineers develop a new way of producing electricity that emits

fewer pollutants.

1. One of the most difficult tasks in regression analysis is to obtain the data suitable for quan-

titative studies of this kind. Suppose you are trying to estimate the demand for home fur-

niture. Suggest the kinds of variables that could be used to represent the following factors,

which are believed to affect the demand for any product. Be as specific as possible about

how the variables are going to be measured. Do you anticipate any difficulty in securing

such data? Explain.