Macroeconomics Answers

Discuss whether a cut in taxation will reduce inflation. 

Briefly define the following macroeconomic objectives and explain in your own words how each can be applied to improve the economy.

1. Economic growth and increasing employment
2. Stable and low inflation
3. Distributional and equity objectives and the reduction of inequality
4. Economic development and poverty reduction.

Using the IS-LM model, explain what could happen if the trust in bright future disappeared from capital markets. You can use some historical events as examples.

2.1 Consider a closed economy that is described by the following model:

C = 280m + 0.72Y

Where:

C = Consumption Y = Income

I = 150m I = Investment

G = 300m G = Government spending

T = 22% t = Tax rate

2.1.1 Calculate the multiplier. (3)

2.1.2 Calculate the total autonomous spending. (2)

2.1.3 Calculate the equilibrium income. (3)

2.1.4 Calculate the level of savings at equilibrium. (2)

2.1.5 Calculate the amount of tax collected at equilibrium. (3)

2.2 Use the Keynesian diagram to explain and illustrate the effect of an increase in investment on employment and output in the economy. (7)

Taxes.......

a. are the level of autonomous spending

b. raise the level of autonomous spending

c. leave the multiplier unchanged

d. are a withdrawal or leakage from the flow of income and spending

e. lower the level of autonomous spending

What are the various types of inflation? What are the criteria used for differentiating

between them? Explain.

What are the differences between the Fisherian and Cambridge versions of the

quantity theory of money?

State various economic transactions, which are used to study circular flow of an

economy.

Why might governments intervene to encourage firms to develop and adopt new technologies

During the Revolutionary War, the American colonies could not raise enough tax revenue to fully fund the war effort. To make up the difference, the colonies decided to print more money. Printing money to cover expenditures is sometimes referred to as an inflation tax. Who do you think is being taxed when more money is printed? Why?