Macroeconomics Answers

how does the current deficit(negative balance of trade)affects terms of trade

What effect will the depreciation of the rand have on the demand for foreign goods?

A closed economy was observed in two different years to be operating with levels of output at:(a) aggregate supply was equal aggregate demand for goods and services but planned domestic investment was greater than planned domestic saving ( b) aggregate supply was equal aggregate demand for goods and service but planned domestic investment was less than planned domestic saving. Use a diagram to explain the forces that would move the economy towards a stable equilibrium in each case.

The Covid19 crisis and lockdown has been a supply response, the government Use the ADAS model, in conjunction with the IS of the shock and policy response.offered a R500bn stimulus package side shock to the South African economy. In to help cushion the blow.LMBP, to explain the supply and demand dynamics Where will equilibrium income and prices settle? Draw the graphs and explain the complete chain reaction. Total mark out of 30 2

A firm’s demand curve in period 1 is Q=25 - P. Fixed costs are 20 and marginal costs per unit are 5. (5 marks) a. Derive equations for total revenue and marginal revenue. b. At what output will marginal revenue be zero? c. At what price will total revenue be maximized? d. At what price and output will profit be maximized? e. Calculate the maximum profits the firm makes.

Given the amount of money being printed the amount of Base Currency sitting as Reserves on bank balance sheets far exceeds currency in circulation when normally the reserves only slightly exceed currency in circulation in a fractional reserve system. How can one derive the cumulative inflation effect of these excess reserves via k assuming the economy being in equilibrium with the current amount of currency in circulation? These excess reserves are a liquidity trap waiting to happen in the form of massive inflation, if (post Covid supply chain problems Dir to shifting demand or reduced production capacities etc?) amd when they make their way into the economy. The k factor ought to be able to approximate what the cumulative inflation effect might be. How can that be calculated via the Cambridge k?

QUESTION 2

2.1 Money demand in an economy in which no interest is paid on money is Md/P =1000 + 0.4Y- 100i

(a) Given that P = 100, Y = 1000, and i = 0.10. Find real money demand, nominal money demand, and velocity.(6)(b)The price level doubles from P =100 to P = 200. Find real money demand, nominal money demand, and velocity.( c) Starting from the variables given in part (a) and assuming that the money demand function as written holds, determine how velocity is affected by an increase in real income, (ii) an increase in the nominal interest rate, (iii) an increase in the price level.

2.2(a)How Permanent income hypothesis and life cycle hypothesis explain the differences between the long-run APC and the short-run APC?(b)Use an appropriate diagram based explain why the MEC-curve might overstate the additional investment that could be generated in an economy with a one-percent reduction in the rate of interest.

An open economy is described by the following system of macroeconomic equations, in which all macroeconomic aggregate are measured in billions of Namibian dollars, N$:Y = C + I + G + X –MC = 160 + 0.6 YdT = 100 + 0.25YX = 80I = 150G = 150M = 22 + 0.25YWhere: Yis domestic incomeYdis private disposable income C is aggregate consumption spending T is government tax revenue I is investment spending X represents exports M represents imports of goods and services.

1.1 (a)Determine the equilibrium level of income/ output. (b) Illustrate the aggregate spending curve and equilibrium level of income on a diagram. (c) Determine the surplus/ deficit in the government budget at equilibrium.(d) Determine trade balance at equilibrium. (e) Find the multiplier applicable to autonomous tax and interpret it.1.2 (a)Use the multiplier applicable to exports, to explain how a 100 billion decline in demand for exports could have affected the economy’s:(i)GDP/ output (ii)Balance of trade (iii)Government budget

Why unemployment rate sometimes high sometimes low ? Discuss in detail.

Suppose the following demand and supply function:

Q^d = 750 – 25P

Q^s = -300 + 20 P

       i.           Find equilibrium price and quantity

     ii.           Find consumer and producer surplus