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QUESTION ONE (30 Marks)
Consider a closed economy that is characterized by the following equations:
Y = C + I + G
C = 900 + 0.5(Y − T)
I = 750 − 30r
T = 800
G = 1200
Md = Ms
Ms = 1500
Mt = 0.7Y
Msp = −80r
Where Y is the GDP, C is private consumption expenditure, I is the Investment expenditure, G
is government expenditure, T is tax revenues, Ms
is money supply, Mt
is transaction demand
for money, Msp is the speculative demand for money and r is the interest rate (in % points).
a) Derive (Md⁄P) the demand for real money balances equation (where P is the aggregate price level
The recent global development of Russia invading Ukraine has led to USA and European countries imposing sanctions on Russia. Given that Russia is a major player in OPEC, discuss the implication of this in South African economy.
Investigate the current economic statistics of each indicator used to measure each macroeconomic objective
Economic indicators used to measure each macro economics objective
The economy is at full employment. now the government wants to change the composition of demand towards investment and away from consumption without, however, allowing aggregate demand to go beyond full employment. what is the required policy mix? use the IS-LM diagram to show your policy proposal
where did the 100 came from??CPI 2016 base year
Suppose China exports TVs and uses the yuan as its currency, whereas Russia exports vodka and uses the ruble. China has a stable money supply and slow, steady technological progress in TV production, while Russia has very rapid growth in the money supply and no technological progress in vodka production. On the basis of this information, what would you predict for the real exchange rate (measured as bottles of vodka per TV) and the nominal exchange rate (measured as rubles per yuan)? Explain your reasoning. (Hint : For the real exchange rate, think about the link between scarcity and relative prices.)
13. According to a study, the price elasticity of shoes in the United States is 0.7, and the income
elasticity is 0.9.
a. Would you suggest that the Brown Shoe Company cut its prices to increase its revenue?
b. What would be expected to happen to the total quantity of shoes sold in the United
States if incomes rise by 10 percent?
11. Why do you think that whenever governments (federal and state) want to increase rev-
enues, they usually propose an increase in taxes on cigarettes and alcohol?
12. Could a straight-line demand curve ever have the same elasticity on all its points?
