Macroeconomics Answers

For 2017, country ABC has the following data (all figures are in billion), AE = $1720, govt. expenditure = $500, Consumption expenditure = $1000, Investment expenditure = $200, Exports = $75. Calculate imports by this country in 2017. 

A firm uses skilled (S) and unskilled (U) labour to produce output (Q). The firm’s production function is given by

   "f(U,S)= sqrt(2U+4S)"

where U denotes unskilled and S denotes skilled labour. Assume U ≥ 0 and S ≥ 0. Let w_u = 6 and w_s = 8 denote the prices of unskilled labour and skilled labour respectively.

a. Suppose (U,S) = (8,5). How much output does the firm produce? What is the total cost of producing that level of output?

b. Let Q₀ and C₀ respectively denote the value of output and total costs obtained in part (a). Firm is not particularly interested in cost-cutting but they are averse to cost-increase. Find out the maximum level of output (Q*) that can be produced with a spending cap of  C₀  and recommend the levels of unskilled (U∗) and skilled labour (S∗) necessary to produce Q∗. Find Q∗, U∗, and S∗.

C=100+0.5yd,Tax=100,I=200,Export=120,G=150,Import=0.03Y. Calculate the equilibrium net income and net exports

Explain with any two examples how to rectify economic variables for the effects of inflation. How does it get expressed in the job market? Why is it needed?

Q 1 Below are some data from the land of milk and honey. 

Year   Price of Milk  Quantity  of Milk   Price  of Honey  Quantity  of Honey 

2016   $1            100 quarts         $2                50 quarts 

2017   1              200              2               100 

2018   2              200              4               100

Compute nominal GDP, real GDP, and the GDP deflator for each year, using 2016 as the base year.

Suppose a country’s population grows at the rate of 2% per year and its output grows at the rate of 3% per year.

a) Calculate its rate of growth of per capita output.

b) If instead its population grows at 3% per year and its output grows at 2% per year, calculate its rate of growth of per capita output.

“People are rational and therefore form expectations rationally. It follows that New Classical macroeconomics is realistic, and thus that government macroeconomic policy can have no effects on real variables.” Discuss.

Explain why long-run Aggregate Supply schedules are usually drawn vertically and shortrun Aggregate Supply schedules are normally upward-sloping.

Explain why long-run Aggregate Supply schedules are usually drawn vertically and shortrun Aggregate Supply schedules are normally upward-sloping.

Using the IS-LM framework, under what conditions and for what reasons is monetary policy impotent ?

Consider the country of Morales with the following closed economy conditions:

Y = C + I + G     where:

C = 100 + 0.75Y

I = 180 – 15i

G = 100

T = 80

M^d = 0.2Y – 5i

M^s = 85

1. Determine the IS and LM relations 
2. Find out the equilibrium income Y and Interest Rate i 
3. Suppose the government increases its purchase by 60 (ΔG = 60). (4 points – show all mathematical work). You will need to redo all the process with the new purchase value which the government has done
4. Economic analysis: Make a comparative analysis of both national outputs and interest rates – no words limit