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Assume that there is economy with increasing of government expenditure and interest rate and aggregate price level are endogenous. Please use graph to show the increasing by using:
b) IS-LM model
c) AD-AS model with the horizontal aggregate supply curve in the short run
(assume both cases initially started from natural level of income)
2. a) Increases in real GDP are often interpreted as increases in the standard of living/welfare.
What are the main problems associated with this interpretation? (4 marks)
In the Keynesian cross, assume that the consumption function is given by:
C = 200 + 0.75 Yd
Planned Investment is 100, Government purchases is 200 and Taxes are 100.
What does 200 represent? What is 0.75? what does Yd mean?
Compute the equilibrium level of income.
Calculate the multipliers of investment and taxes.
Compute autonomous spending. Assume that taxes are not payable when income is zero.
What level of Government spending is needed to achieve an income of 2,400?
b) Assume that a man marries his longtime friend when both of them were employees of the Teachers Service Commission. After they are married, his wife continues to wait on him as before and he continues to support her as before (but as a husband rather than as an employee). How does this marriage impact the GDP?
have on these two variables.
in order to close a recessionary gap. Relate what happens during the
next two phases of the inflation-unemployment cycle to the maxim
“You can fool some of the people some of the time, but you can’t fool all
of the people all of the time.”
contribute to the economy, by saving or by investing? Defend your answer.
b) Explain the concept of supply curve for loanable funds.
c) Explain the effect of increasing in government expenditure through selling of bonds on interest rate in classical model.
2. Please use a graph to produce aggregate supply in classical model under the assumption of nominal wage or money wage.
3. Explain the effect of increasing in money supply on price and national income using a classical theory.
4. Explain how interest rate is determined in a classical theory
b) IS-LM model
c) AD-AS model with the horizontal aggregate supply curve in the short run
(assume both cases initially started from natural level of income
last 50 years. According to the Congressional Budget Office, the natural
rate was 5.5% in 1960, rose to about 6.5% in the 1970s, and had declined
to about 4.8% by 2000. What do you think might have caused this
variation?
a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon.
b. b. The winter is exceptionally cold.
c. c. A major discovery of new oil is made off the coast of Norway.
d. The economies of some major oil-using nations, like Japan, slow down.
e. A war in the Middle East disrupts oil-pumping schedules.
f. Landlords install additional insulation in buildings.
g. The price of solar energy falls dramatically.
h. Chemical companies invent a new, popular kind of plastic made from oil.
#339914 on Dec 2023