Macroeconomics Answers

how real GDP will eventually return to the level of potential GDP.

With the aid of 3 diagrams, analyse the effects of a simultaneous increase in consumers income and cost of production on equilibrium price and quantity of a commodity say X.

Graphically derive the saving function if the consumption function is:

C+ a + bY

Note: In your Graph indicate and explain the following positions: Y>C;

Y<C; Y=C

what is absolute advantage theory

Friedman's quantity theory of money

Using two economist write on criticisms of the classical theory

How to determine equilibrium level of income. Where

Y=C+Io+Go

C=a+bYd

Yd=Y-T

a=100

Io=100

b=0.75

T=200

Go=200

Explain how the interest rate works in the classical system to stabilize aggregate demand in the face of autonomous changes in components of aggregate demand such as investment or government spending.

Find (a) the reduced form. (b) the numerical value of 𝑌𝑒 , and (c) the effect on the multiplier if a proportional income tax (t) is incorporated into the model. 𝑌 = 𝐶 + 𝐼, 𝐶 = 𝐶𝑂 + 𝑏𝑌 𝑑 , 𝑇 = 𝑇𝑂 + 𝑡𝑌, 𝑌 𝑑 = 𝑌 − 𝑇 where 𝐼 = 𝐼𝑂 = 30, 𝐶𝑂 = 85, 𝑏 = 0.75, 𝑡 = 0.2, and 𝑇𝑂 = 20

If the south African reserve bank wants to Raise money supply Growth , it should....