Macroeconomics Answers

GIVEN: Ca = 5,000       

mps = 0.1          

I = 6,000            

G = 4,000

          Ta = 1,000   

mpt = 0.2  

   TR = 1,500

REQUIRED: Answer the following questions. Show the solutions.

1.   Formulate the consumption function.

2.   Formulate the savings function.

3.   Derive the equilibrium income for an economy consisting of HHs only and prove that Y = C  &  S = 0 using any approach of your choice.

4.   Derive the equilibrium income for an economy consisting of HHs & BFs and prove that Y = C + I and S = I using any approach of your choice.

5.   Derive the equilibrium income for an economy consisting of HH, BF & G does not impose taxes and prove that Y = C + I + G & S = I + G using any approach of your choice.

6.   Derive the equilibrium income for an economy consisting of HH, BF & G imposes fixed taxes and prove that Y = C + I + G & S + T = I + G using any approach of your choice.

7.   Derive the equilibrium income for an economy consisting of HH, BF & G imposes fixed & behavioral taxes and prove that Y = C + I + G & S + T = I + G using any approach of your choice.

8. Derive the equilibrium income for an economy consisting of HH, BF & G imposes fixed & behavioral taxes but grants transfer payments and prove that Y = C + I + G & S + T = I + G + TR using any approach of your choice. 

In an economy C= 200 + 0.5 Y is the consumption function where C is the 

consumption expenditure and Y is the national income. Investment 

expenditure is ₹ 400 crores.

Is the economy in equilibrium at an income level ₹1500 crores? Justify your 

answer.

GIVEN: Ca = 5,000       

mps = 0.1         

 I = 6,000            

G = 4,000

          Ta = 1,000 

   mpt = 0.2  

   TR = 1,500

REQUIRED: Answer the following questions. Show the solutions.

1.   Formulate the consumption function.

2.   Formulate the savings function.

3.   Derive the equilibrium income for an economy consisting of HHs only and prove that Y = C  &  S = 0 using any approach of your choice.

4.   Derive the equilibrium income for an economy consisting of HHs & BFs and prove that Y = C + I and S = I using any approach of your choice.

5.   Derive the equilibrium income for an economy consisting of HH, BF & G does not impose taxes and prove that Y = C + I + G & S = I + G using any approach of your choice.

6.   Derive the equilibrium income for an economy consisting of HH, BF & G imposes fixed taxes and prove that Y = C + I + G & S + T = I + G using any approach of your choice.

7.   Derive the equilibrium income for an economy consisting of HH, BF & G imposes fixed & behavioral taxes and prove that Y = C + I + G & S + T = I + G using any approach of your choice.

8.   Derive the equilibrium income for an economy consisting of HH, BF & G imposes fixed & behavioral taxes but grants transfer payments and prove that Y = C + I + G & S + T = I + G + TR using any approach of your choice.

Government spending is 700; investment is 310 and consumption is given by 

C=250+0.8Yd

Net tax T=-50+0.25Y

I. Cal equilibrium income

Ii. Assume investment falls by 80units,compute new level of equil income and the value of budget deficit/surplus at that level.of income.

Iii. Suppose that government raises lump-sum taxes by the any of deficit /surplus in order to bal the dudget,what will be the new level.of equil income?

Derive the conditions for steady state growth in the Solow model. What are its implications? In what respects is the golden rule different from the steady state? 

1.   Suppose Alphonso’s town raises the price of bus tickets from $0.50 to $1 and the price of burgers rises from $2 to $4. Why is the opportunity cost of bus tickets unchanged? Suppose Alphonso’s weekly spending money increases from $10 to $20. How is his budget constraint affected from all three changes? Explain.

Using cardinalists approach of consumer behavior distinguish between income and and substitution effect of a price rise for a normal good?

10. A firm supplies 200 units of a good at a price of Rs 5 per unit. When

price changes it supplies 100 units less. Price Elasticity of Supply is 2.5.

Calculate price after change in quantity.

9. A fall in the price of X from Rs. 12 to Rs. 8 causes an increase in the

quantity of Y demanded from 900 to 1,100 units. X and Y are which type of

goods in the question.

A 10 percent decrease in income decreases the quantity demanded of

compact discs by 3 percent. Find the income elasticity of demand for

compact discs.