Macroeconomics Answers

The utility function of an individual is given by U=X^(3/4) Y^(1/4). The price of good x is K6 per unit. The price of good y is K3 per unit. The individual/s income is K120.
(a).Using the Lagrangian method, find how much of each good the individual will consume to maximize utility. (8 MARKS)
(b).Plot the budget line and include an indifference curve on the same diagram to show the optimal combination obtained above. (4 MARKS)
(c).Mathematically prove that at the above optimal combination of goods, the slope of the budget line equals the slope of the indifference curve (4 MARKS)

Which of the following statements is correct about the marginal propensity to consume (MPC)?
A. MPC – marginal propensity to save = 1
B. MPC is equal to or greater than one at all income levels.
C. MPC is greater than zero but less than one.
D. MPC may be negative.

discuss using indifference curve analysis how the impact of an increase in indirect taxation on the quantity demanded of a good depends on whether it is normal or inferfoir goods

Which of the following are macroeconomic objectives?
a. unemployment, economic growth and inflation
b. external stability, full employment and economic growth
c. equitable distribution of income and price stability

An increase in the supply of dollars in the South African foreign exchange market can be caused by
[1] more South African firms purchasing capital goods from the United States.
[2] an increase in the gold price.
[3] a decrease in economic activity in the United States.
[4] more South African tourists visiting the United States.

year GDP at current prices
1 100
2 110

which of the following statements are correct?
a, The increase in GDP from year 1 to year 2 can be the result of an increase in the general price level.
b, The increase in GDP from 1 year to year 2 can be the result of an increase in real production.
c, from the given information, it is impossible to tell whether the 10% increases in GDP from year 1 to year 2 represents economic growth.

[1] all the statement are correct.
[2] a and b
[3] b and c
[4] a and c
[5] a

Q4: State why each of the following statements is true or false:
1. If the value of output by citizens outside the country is greater than the value of output by foreigners inside the country GNP will be less than GDP.
2. GNP may equal GDP.
3. GDP is the best measure of economic welfare.

A technological improvement in the production process of compact disc players will lead to a....

1. Identity the two major accounts of the balance of payments and explain the key difference between the two accounts .

2. Define the term “inflation” and indicate the index that is used to measure the rate of inflation