Macroeconomics Answers

What is Elasticity of Demand? Explain Price, Cross and Income Elasticity of Demand used in managerial decision making process.

What do you mean by Monopoly? How price and output is determined in short and long run in Monopoly Competition?

1.    Show using the IS-LM graph the impact of an expansionary fiscal policy if the LM curve is vertical. If you were the Economic Planner in this country, how would you implement the fiscal policy without causing any crowding out of private investment? (You may insert a snapshot of the graph if drawn manually) (5 marks).

1.    Suppose the IS curve is Y = 39XX-100i and Y = 1500 + 250i is the LM curve, where XX is the last two digits of your ID number. Using these compute:

a)    The equilibrium interest rate and output (i*and Y*).

b)   If government spending was increased by 100m with an immediate impact elasticity of 2.5 in the goods market, determine new income and interest rate.

c)    Determine the impact of the above policy on private investment if it is known that di/dA = XX/100, where XX is the last two digits of your ID number.

d)   Determine the magnitude of the change in money supply required to eliminate any crowding out effect in (c) above. Suppose di/dMs = -0.1X, where X is the last digit of your ID number.

e)    Explain the dynamics represented in (a-d) using an IS-LM space. (You may insert a snapshot of the graph if drawn manually).

Knowing a country’s economic problems and issue help to gauge or determine what

about a country?

Qd = 25000 – 2P

Qs =10000 + 1P

Calculate price elasticity of demand using point elasticity method when the construction industry is in equilibrium and interpret the result? 

1.     Suppose the IS curve is Y = 39XX-100i and Y = 1500 + 250i is the LM curve, where XX is the last two digits of your ID number. Using these compute:

a)     The equilibrium interest rate and output (i*and Y*).

b)     If government spending was increased by 100m with an immediate impact elasticity of 2.5 in the goods market, determine new income and interest rate.

c)     Determine the impact of the above policy on private investment if it is known that di/dA = XX/100, where XX is the last two digits of your ID number.

d)     Determine the magnitude of the change in money supply required to eliminate any crowding out effect in (c) above. Suppose di/dMs = -0.1X, where X is the last digit of your ID number.

e)     Explain the dynamics represented in (a-d) using an IS-LM space. (You may insert a snapshot of the graph if drawn manually).

With the aid of a diagram and using the Keynesian analysis , explain in detail how income and aggregate spending are affected by the following by the government spending and a cut in spending by European firms

QUESTION 19

Protectionism:

1. Is always the best solution.
2. Costs jobs in the protected industry.
3. Creates jobs in other unprotected industries.
4. Costs jobs in other unprotected industries.
5. None of the above.

QUESTION 20

One concern is that globalization may:

1. Impose costs on low-skilled workers.
2. Benefit low-skilled workers.
3. Benefit low-wage workers.
4. Impose costs on high-skilled workers.
5. Impose costs on high-wage workers.

QUESTION 21

Trade will cause the average level of wages in an economy:

1. To increase.
2. To remain unchanged.
3. To decrease.
4. To stagnate.
5. To do loops.

QUESTION 22

The real problem in low-income countries is that:

1. They are all run by brutal dictators.
2. They have too many high-skilled workers.
3. They have so many good life alternatives.
4. They have so few good life alternatives.
5. All of the above.

QUESTION 15

In the U.S., the impact of trade:

1. On high-income workers is small.
2. On low-income workers is small.
3. On low-income workers is large.
4. On large-income workers is small.
5. Is negligible.

QUESTION 16

Eliminating trade barriers in one sector of the economy will likely result in:

1. No change in the number of jobs.
2. An increase in the number of jobs in other sectors.
3. A decrease in the number of jobs in that sector.
4. All of the above.
5. Answers B and C only.

QUESTION 17

When a country enacts protectionism:

1. It gains net economic benefits.
2. It has no impact on economic benefits.
3. It loses net economic benefits.
4. It favors trade with other countries.
5. All of the above.

QUESTION 18

These often have a better record of compliance with environmental laws.

1. Foreign-owned plants in the U.S.
2. Foreign-owned plants in high-income countries.
3. Foreign-owned plants in low-income countries.
4. U.S.-owned plants in all other countries.
5. All of the above.

QUESTION 11

How much do United States consumers pay for food because of elevated sugar costs?

1. $1 million.
2. $10 million.
3. $100 million.
4. $1 billion.
5. $10 billion.

QUESTION 12

Protectionism for infant industries always imposes costs on:

1. The government alone.
2. Domestic users of the product.
3. Foreign users of the product.
4. Domestic producers of the product.
5. All of the above.

QUESTION 13

Consumers end up paying billions of dollars more for clothing each year:

1. In lesser developed countries.
2. In unregulated countries.
3. Because textile and apparel protectionism adds to the costs of imports.
4. Because textile and apparel protectionism is impossible.
5. Because textile and apparel protectionism decreases the costs of imports.

QUESTION 14

An argument for shutting out certain imported products is that:

1. They are perfectly safe for all users.
2. They are perfectly safe for some users.
3. They are unsafe for consumers.
4. They are unsafe for producers.
5. They are perfectly safe for producers.