Macroeconomics Answers

Suppose that a small national economy consists of one firm. During a certain period of time the firm: 

Imports of raw material from abroad costing   Rs. 4000

Hires labor, who are paid wages are Rs. 9000

Sells all its output for Rs. 20000 and so makes a profit of Rs. 7000

Pays its post-tax profit of Rs. 4000 to stockholders 

The country‘s government taxes the labor force Rs. 2000 and the company Rs. 3000

The firm‘s sales of Rs. 20000 are accounted for by:

Domestic consumers who spend Rs.11000 this Rs.11000 is the post-tax wages earned by the labor force (Rs.7000) plus Rs.4000 in dividends earned by the company company’s stockholders;

The government which spends the Rs. 5000 it has raised in taxes ;

Foreign buyers who spend Rs. 4000

Calculate the GDP with three measures

Income Approach

Expenditure Approach

Output or value-added Approach

For each of the following assets, answer if it is considered:

• M1 money
• M2 money
• Neither M1 or M2 (it is not currency)

1. $0.27 cents that has accumulated under a couch cushion.
2. Your $2,000 line of credit with your Visa account. 
3. The $210 balance in your checking account. 
4. $800 in a 12-month CD (certificate of deposit)
5. 10 shares of stock your uncle gave you on your 18th birthday, which are now worth $520. 
6. $200 in traveler’s checks you have purchased for your spring‐break trip. 

An expansionary monetary policy is shown as

Explain the three approaches to national income accounting in detail. Why are the three approaches to national income accounting equal? Are the three approaches give the same answer?

41.Suppose that an auto company owned entirely by Canadian citizens opens a new facility in the U.S. Answer all three parts below. In each case, carefully explain your answer.

a) What sort of foreign investment would this represent?

b) What would be the effect of this investment on current Canadian Gross Domestic Product (GDP) and U.S. GDP?

c) What would be the effect of this investment on future per capita incomes in the United States?

44.a)  Explain the influence of each of the following on the natural rate of unemployment

 i.  Employment Insurance

 ii.  the minimum wage

 iii.  efficiency wages.

b) How would the natural rate of unemployment have been affected by the Covid-19 pandemic?

Which one of the following statements is correct :

(a). An increase in expenditure for healthcare that is financed from moving funds from the education budget will increase the budget deficit.

(b). A decrease in the number of items exempted from VAT will increase the budget deficit.

(c). A decrease in VAT from 15% to 14% will increase the budget deficit

(d). An increase in the corporate income tax rate will increase the budget deficit

1. A reduction in the tax rate will increase the disposable income of consumers. True/False

2. Structural unemployment occurs when a slump or recession in the economy (as a result of a temporary lack of demand) gives ride to unemployment. True/False

The multiplier effect means that

A. consumption is typically several times as large as saving.

B. a small change in consumption can cause a much bigger increase in investment.

C. a small decline in the MPC can cause equilibrium GDP to rise by several times that amount.

D. a small increase in investment can cause a GDP to change by a larger amount.

5.1 Suppose that the price f whiskey increases from R100 to R150 a bottle and as a result the quantity demanded decreases from 1 100 bottles to 800 bottles. 5.1.1 Use ARC (midpoint) formula to calculate the price elasticity of demand for whiskey. 5.1.2 Based on the calculated elasticity value in 5.1.1 indicate whether the demand in the market for whiskey is elastic and inelastic 5.1.3 Based on your answer in 5.1.2, illustrate the elasticity of demand in the market in the market for whiskey. Clearly indicate the correct percentage in price and quantity on the elasticity graph. 5.1.4 Explain how producers could increase total revenue given the calculated elasticity coefficient.

Suppose last year's consumer price index was 1.20. If the inflation rate is 4%, then find out the consumer price index of the current year.