Macroeconomics Answers

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.

.   If investment is completely interest inelastic:

(i)              What are the new equations for the IS and LM schedules. Show them graphically.

(ii)             Find the new equilibrium values for income and interest rate.

C=100+0.75Y

T=50+0.5Y

X=200

M=50+0.25Y

G=150. Illustrate aggregate spending and equilibrium level of income on a diagram

The infinitely-lived representative consumer has preferences given by

∞

βt (ln ct + γ ln lt) , t=0

where 0 < β < 1, ct is consumption, lt is leisure, and γ > 0. Each period,

the consumer has one unit of time endowment which can be allocated

between work and leisure. The production technology y = kαn1−α , ttt

0 < α < 1, where k is the capital input and n is the labor input. Capital depreciates by 100% each period.

(a) Determine the paths followed by consumption, leisure, capital and output in a competitive equilibrium.

(b) How are your results in part (a) affected by γ? Determine how γ affects the steady state levels of consumption, capital and leisure and output. Explain your results briefly.

According to a Fisher effect, how how does an increase in theinflation rate affect 

the real interest rate and nominal interest rate?

 What is the GDP per capita in Stickmanland this year? How does GDP per capita

reflect the quality of life in Stickmanland?

In 2017-18 the Pakistan Bureau of statistics announced that of all adult Pakistanis, 59,786,200 were employed, 3,613,800 were unemployed and 58,800,000 were not in the labor force. Use this information to calculate the labor-force participation rate.

What are the savings and investment,when the GDP is $1000, consumption is $600, taxes are $100, and the government purchases is $200

Outline and explain one criticism some people have regarding Keynesian Economics

An economy produces three goods: orange, apple and orange juice. It is assumed that half of the orange are bought and consumed as final good; the other half is used to produce orange juice.                                              

In 2019, 200 KGs of oranges are produced at Rs.40/kg, 500 KGs of apples are produced at 120/kg, and 200 Glasses of orange juice are produced at Rs.150/glass.

In 2020, 220 KGs of oranges are produced at Rs.50/kg, 450 KGs of apples are produced at 140/kg, and 230 glasses of orange juice are produced at Rs.135/glass.

Assuming 2019 is the base year, calculate the GDP Deflator in 2020.