Macroeconomics Answers

Determine the effects of a reduction in the tax rate from 0.25 to 0.2 on equilibrium income, budget and trade balance.

 Reflecting on the above situation justify whether the State Bank of Pakistan should opt for easy or tight monetary policy as a stabilization policy. Also illustrate it graphically. (2.5 Marks)

b.          Reflecting on the above situation justify whether the Government of Pakistan should opt for expansionary or contractionary fiscal policy as a stabilization policy. Also illustrate it graphically.   (2.5 Marks)

How much is the total deposits recorded in balance-sheets for all commercial banks after credit has been fully created at the end of March 2019?

a.          Reflecting on the above situation justify whether the State Bank of Pakistan should opt for easy or tight monetary policy as a stabilization policy. Also illustrate it graphically. (2.5 Marks)

b.          Reflecting on the above situation justify whether the Government of Pakistan should opt for expansionary or contractionary fiscal policy as a stabilization policy. Also illustrate it graphically.   (2.5 Marks)

COVID-19 all around the world has restricted the economic activity. To stop the spread of the virus Pakistan like many other countries adopted the policy of smart lockdown. Shutting down of the industry has created adverse supply shock in the economy. While, the slowdown in business and economic activities the country is in the recessionary phase of the business cycle as the GDP growth for the FY 2020-21 is expected to be -0.2 accompanied by high unemployment and poverty rate.

Which of the following is not true of the Keynesian model?

Select one:

A. The wage bargain is struck in terms of money wages.

B. An increase in the expected price level would cause labour supply to decline.

C. Imperfect information about prices explains fluctuations in output and employment.

D. Price expectations are essentially forward-looking.

E. An increase in the money wage for a given value of the expected price level would increase labour supply.

Which of the following statement is not true?

Select one:

A. If money demand is completely interest insensitive, the LM curve is vertical.

B. An increase in money demand for speculation shifts the LM schedule to the left.

C. In the liquidity trap situation, increments to wealth would be held in the form of money.

D. Keynes assumes that investors have a relatively fixed conception of the critical interest. rates

E. A shift in the money demand function is also known as a shift in liquidity preference.

Properties of individual demand

What causes the demand curve to shift

what causes the money demand curve to shift rightward

Can the approaches used by other countries to deal with the increasing public sector wage bill be used in South Africa