Macroeconomics Answers

 Suppose there are two contrasting impacts of a massive war, where a large number of countries were involved (e.g. World War II), on two large countries (Ping and Pong) in the world. Ping suffered a massive destruction of its capital stock relative to its population, while Pong suffered a huge loss of its population relative to its capital stock. That is, capital labour ratio suddenly fell in Ping and rose in Pong. For simplicity that all other things remained same. Assuming that both the country were in steady-state before the war, show the impact of the war on these two countries using a Solow diagram (i.e., capital labour ratio on the horizontal axis and output and savings on the vertical axis). Clearly draw and write your answer

In an economy, the marginal propensity to consume is 0.6. All other things being equal, which one of the following statements is correct?

A A £5 billion reduction in the economy’s national income will result in a £3 billion fall in consumption

B If injections into the circular flow of income equal £20 billion, national income will equal £32 billion

C If injections into the circular flow of income rise by £10 billion, national income will rise by £6 billion

D When the economy’s national income equals £100 billion, consumption will equal £60 billion

In an economy, over the last decade, each of the top five decile groups has experienced a fall in their share of total income. In contrast, the bottom five decile groups have experienced a substantial increase in their share of total income.

It can be concluded that, over this period, the distribution of income is most likely to have become

A more equal

B more equal but less equitable

C more equitable

D more equitable but less equal

One-fourth of the married couples in a far-off society have exactly three children. The other three-fourths of couples continue to have children until the first boy and then cease childbearing. Assume that each child is equally likely to be a boy or girl. What is the probability that the male line of descent of a particular husband will eventually die out?

The Covid-19 crisis and lockdown has been a supply-side shock to the South African economy. In response, the government offered a R500bn stimulus package to help cushion the blow. Use the AD-AS model, in conjunction with the IS-LM-BP, to explain the supply and demand dynamics of the shock and policy response. Where will equilibrium income and prices settle?

1. The equation of exchange is helpful for determining the effect of money supply changes on the price level. Use the equation of exchange to answer each of the following questions.

a) Real GDP grows at 3% and inflation is equal to 2%, but there is no change in velocity. What can you conclude about the change in the money supply?

b) Real GDP falls by 3% and there is no inflation, but the money supply grew by 5%. What is the implied change in velocity?

c) Real GDP increases by 3%, velocity does not change, and the money supply grows by 10%. What is the implied rate of inflation?

d) The money supply grows at 6%, velocity is constant, and inflation is 3%. What can you conclude about the rate of real GDP growth?

2. If healthcare costs make up 10% of total expenditures and they rise by 15% while the other components in the consumer price index remain constant, by how much will the price index rise?

If consumption is C=100+0.75Yd

Taxes is T=50+0.5Y

Export is X=200

Import is M=50+0.25Y

Government spending is G=150

Investment is I=200. Y is domestic income and Y is private disposable income. Use the multiplayer application to export, to explain how a 100 billion decline in demand for export could affect the economie's GDP/income

Suppose the discriminating monopolist is selling a product in two separate markets in which demand function are                                                                                                                        

P₁ = 80 – 2.5Q₁

P₂ = 180 – 10Q₂

The monopolist total cost function is

TC = 50 + 40Q