Macroeconomics Answers

it economically advisable to hold money for transaction and precautionary motive in times of high inflation? Explain. [10]
Explain why population growth can be regarded as mixed blessing as far as economic growth is concerned. [05]
Explain why a net borrower might become a net lender in future, but a net lender will never become a net borrower following an increase in inflation rate.

6. Consider an economy described by the following equations:
Y = C + I + G
Y = 5,000 G = 1,000 T = 1,000
C = 250 + 0.75(Y − T) I = 1,000 − 50 r.
a. In this economy, compute private saving, public saving, and national saving.
b. Find the equilibrium interest rate.
c. Now suppose that G rises to 1,250. Compute private saving, public saving, and national saving.
d. Find the new equilibrium interest rate.

There is a high cross elasticity of demand between new and old cars”. Discuss the
statement by explaining the features of cross elasticity of demand. Also compare and
contrast cross elasticity with other types of elasticities of demand

According to the East Asia and Pasific Economic update published by the World Bank in April 2015, the following factors have affected China’s real GDP in 2015.
• Global economic recovery supports a moderate increase in China’s exports.
• China benefits from a fall in the world price of oil
• Chinese government to cut excess capacity in heavy industry
• U.S firms to relocate their labor-intensive manufacturing industries to low-cost a countries.

7. Explain how each factor separately affect China’s real GDP and the price level, starting from a position of long-run equilibrium. (3 marks)

8. Explain the combined effects of these factors on China’s real GDP and the price level, starting from a position of long-run equilibrium. (3 marks)

Assume that millennials, who spend an average of RM100 a day, are expected to spend at a higher rate in the next ten to fifteen years. 37 percent of millennials report higher spending today than a year ago, while 42 percent of millennials say they are spending more. Furthermore, millennials are spending more on rent or mortgages and leisure activities than they were spending a year ago. Graphically illustrate the macroeconomic equilibrium after the change in spending by millennials:

State whether the following statement is true or false and support your answer with facts and figure:
‘‘In the past few decades, primary sector has created maximum jobs in Pakistan.’’

Current financial transaction of government is in

If the real interest rate in Mexico is higher than that of the United States, what will happen to capital flow:
Mexico will experience capital outflow, the U.S. will experience capital inflow
Mexico and the U.S. will both experience capital inflow
Mexico will experience capital inflow, there will be no change the U.S.’s capital flow
Mexico will experience capital inflow, the U.S. will experience capital outflow

An increase in net exports will have which of the following effects on the loanable funds market graph:
Increase in supply of loanable funds
Decrease in supply of loanable funds
Increase in demand of loanable funds
Decrease in demand of loanable funds

The Real GDP of the U.S. rises relative to the GDP of India, increasing income in America
What happens to capital flows in this scenario, due to the change in value of its currency?
Graphically illustrate the change in the loanable funds market for the U.S. given the information gathered in question A. Be sure to label your graph.
What impact did this have on domestic real interest rate?