Macroeconomics Answers

b. Analyze how much Pakistan’s GDP and each of its components is affected by the following transactions? Explain your answers (2.5 Marks, Maximum 200 words).

i. Toyota Motors issues new shares to finance the construction of an automobile plant in Pakistan.
ii. Your friend wins Rs.2 million in the lottery in Dubai
iii. Rabia spends Rs.1500 to buy her husband dinner at the finest restaurant in Karachi
iv. General Motors builds Rs.40 million worth of cars, but consumers only buy Rs. 38 million worth of them.
v. Sadia spends 50000 on a computer to use in her editing business in Karachi. She got last year’s model on sale for a great price from a local manufacturer.

suppose tickets to a basketball game with broad appeal are inexpensive but you can
only obtain them by standing in line for many hours.the tickets cannot be transferred from one person to another. who would be more likely to buy tickets to this game; college students or leaders of major corporations?

The monetary transmission mechanism can be depicted in the form of a graph
or using symbols.
Explain, with the aid of symbols, the monetary transmission mechanism when
interest rates increase
(Note: Prices and wages are variable.)
(10)

Q.3.2 Explain, using the AD‐AS model, how the South African Government can use
fiscal policy as a tool to recover from the negative effects of this COVID‐19
pandemic.
Your answer must include the following:
 The description of the type of fiscal policy required; (4)
 An explanation of how the implementation of this tool will work their way
through the economy to achieve the desired effect; (6)
 The AD‐AS graph showing the implications of your recommendations. (5)

C = 450 + 0.4Y
I = 350
G = 150
X = 70
Z = 35 + 0.1Y
T = 0.15Y
Yf = 1550

C = 450 + 0.4Y I = 350
G = 150
X = 70
Z = 35 + 0.1Y T = 0.15Y
Yf = 1550
Q.2.1 Calculate the level of autonomous spending in this economy.
(2)
Q.2.2
Calculate the size of the multiplier
(Note: Round your answer to two decimal places)
(4)
Q.2.3
Calculate the equilibrium level of income (Hint: use the multiplier method)
(2)
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Q.2.4
Q.2.5
Q.2.6
Question 3
Calculate the tax revenue to the government of this country when the economy (2) remains in equilibrium.
Calculate what the new equilibrium income should be if the government of this (6) country decides to cancel all taxes, implying the tax rate would now be 0%.
Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?

Mr Brown has recently been retrenched. The firm he worked for had to retrench
a number of staff due to the downturn in the economy. Mr Brown has not
managed to find alternative employment. We can say he is _________________
unemployed.

Explain, using the AD‐AS model, how the South African Government can use fiscal policy as a tool to recover from the negative effects of this COVID‐19 pandemic. Your answer must include the following:  The description of the type of fiscal policy required; (4)  An explanation of how the implementation of this tool will work their way through the economy to achieve the desired effect; (6)  The AD‐AS graph showing the implications of your recommendations. (5)

The following information is provided about an open economy with a government. Use the
information to answer the questions that follow:

C = 450 + 0.4Y
I = 350
G = 150
X = 70
Z = 35 + 0.1Y
T = 0.15Y
Yf = 1550

Q.2.1 Calculate the level of autonomous spending in this economy.

what is the shape of Philips curve in long run?