Macroeconomics Answers

How much did the government of BC spend on health care during 2002-03

If the demand function faced by a firm is:

Q = 90 – 2P

TC = 2 + 57Q – 8Q² + Q³

Determine the level of output at which the firm maximizes the profit.

Determine the best level of output for the above question by the MR and MC approach.

1.a)Draw an A.D/A.S graph showing inflationary gap.

b)Draw an A.D/A.S graph showing a recessionary gap.

c)Using the same graphs you have drawn in A and B, show what the long run equilibrium position would be in each case if the government did nothing(i.e.,let the economy self-adjust)

2.Explain how savings function is derived from the consumption function, and how the saving schedule and graph of the saving function are constructed

Starting from general equilibrium, what would be the long-run effects of a simultaneous reduction in government purchases (G↓) and increase in the money supply (M↑) designed to leave real GDP the same on each of the following economic variables? For each, you should write one of the following responses:  Up (U), Down (D), orSame (S)

1. The real interest rate (r)
2. Investment (I)
3. Consumption (C)
4. The price level (P)
5. Budget deficit (G – T)
6. Future standard of living (i.e., future per capita consumption)

1.  Which of the following headlines is more closely

related to what microeconomists study than to what macroeconomists study?

a. Unemployment rate falls from 7.5 percent to 7.3 percent. b. Real GDP

falls by 0.4 percent in the third quarter.

c. Inflation was 2.4 percent last year.

d. The price of gasoline rises due to rising oil prices.

Macroeconomics equips you with the necessary skills to become economic policy makers. As economic policy makers, you need to understand macroeconomic fluctuations and the roles of monetary and fiscal policies in managing the economy.

You are required to select an article from printed or online media on any stricken economy.

The article must have been written after June 1, 2019. A copy of the article showing date and source is to be attached with the assignment as appendix.

You are to critically apply Keynesian economics to fix the economic problem.

Diagram must be well labeled.

The assignment should include:

• Why were Keynesian ideas revolutionary?

• What economic problems in your news article that require government intervention?

• How the economic problems would be approached by Keynesian economists?

• Do you have faith that this intervention will be effective?

• How have the economists’ views on Keynesian economics changed over time?

• Is Keynesian economics dead today?

The fundamental equations in an economy are given as:

Consumption function C =200+0.8yd

Investment function. I=300

Tax. T=120

Government expenditure. G=200

Exports. X=100

Imports M=0.05y

Find the following.

1.The equilibrium level of income.

2.The net exports.

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).

1.     Drive the AD (Aggregate Demand) curve using the following: IS curve is given as Y = 20XX-100i, LM₁ is Y= 1000+25i (when P = 1) and LM₂ is Y = 500+25i (when P =2), where XX is the last two digits of your student ID number. Show the derivation in (interest rate-income) and (price level-income) spaces. (You may insert a snapshot of the graphs if drawn manually).