Macroeconomics Answers

Suppose the production function is Y = AK^0.3N^0.7.Suppose in 2010, K = 1000, N = 100, and Y = 199.5.

In 2020, capital, labor, and output have doubled, soK = 2000, N = 200, and Y = 399.

(a.)        By what percentage did productivity grow from2010 to 2020?

(b.)        If output had risen to 798 instead of 399, and capitaland labor doubled, by what percentage wouldproductivity have grown from 2010 to 2020?

C= 100 + 0,8Yd

I=150+0,2Y

G=400

T=0,2Y

X=500

M=200+0,24Y

a.      Determining the national equilibrium output and trade balance?

b.     What is the situation of government budget?

c.      If government spending increases 70, how does the output change?

d.     If the exports increase by 100, how does the output change?

A country has the following information:

Autonomous consumption is 500

Marginal propensity to save is 0.2

Autonomous investment is 800

Marginal propensity to invest equals 0.12

Autonomous tax is zero

The marginal tax rate is 0.15

Government spending is equal to 1000

Export is 400

Autonomous Import is equal to 200

Marginal propensity to import is equal to 0.05

Question:

a.                            Calculate equilibrium output, trade balance, and budget balance. Calculate the total savings of the economy.

b.                           Calculate the amount of government expenditures or taxes that need to be adjusted knowing the potential output is 9000

c.                            If the marginal tax rate is the same, then what is value of government spending in order to balance the government’s budget?

d.                          If the government wants to spend 200 more but do not want to make output change, how much taxes should be changed?

e.                            If the government increases the spending 50 and increase the tax 50, how much the aggregate demand and output change?

C= 15 + 0.9 Yd

I = 80

G= 200

Tr = 10 Tx = 0.1Y X = 120

M = 24 + 0.06 Y

a.      Calculate the net tax fuction

b.     Calculate the equilibrium output by aggregate demand-aggregate supply method

c.      Calculate equilibrium output by the method:

S + T + M = I + G + X

d.     When the economy is in equilibrium, is the government budget surplus or deficit?

e.      When the economy is in equilibrium, trade surplus or deficit?

1.     ) Suppose Cm = 0.6 and Im = 0

a.             Multiplier value?

b.            If autonomous investment increases by 25, what is the extra output?

c.             If autonomous consumption is 60, autonomous investment is 90, what is the equilibrium output?

Question Three

The New trade theory suggests that the ability of firms to gain economies of scale has shown significant implications for international trade. Trade is mutually beneficial because it allows for the specialisation of production in specific locations where final products are produced.

Critique the new international trade theory propositions and ways in which this situation would be improved? What are the major problems this arrangement poses to the generation and movement of raw materials and finished products?

Question Three

The New trade theory suggests that the ability of firms to gain economies of scale has shown significant implications for international trade. Trade is mutually beneficial because it allows for the specialisation of production in specific locations where final products are produced.

Critique the new international trade theory propositions and ways in which this situation would be improved? What are the major problems this arrangement poses to the generation and movement of raw materials and finished products?

You win 5000 rupees in best singing competition. You have a choice between spending the

money now or putting it away for a year in bank account which pays 4% interest. What is the

opporuntiy cost of spending Rs.5000 now?

Support the answers with similar instance.

you are the manager of a firm that produces and markets a generic type of soft drink in a competitive market,in addition to the large number of generic products in the market .you also compete against major brands such as coca cola and pepsi, suppose that due to successful lobbying efforts of sugar producers there is going to be a $300 tariffs on all imported raw sugar . the primary input for your products , in addition , coke and pepsi plan to launch an aggressive advertising campaign designed to persuade consumers that their branded products are superior to generic soft drinks , How will these events impact the equilibrium price and quantity of generic soft drinks

Distinguish between shift in demand and movement along a curve