Macroeconomics Answers

Which one of the following is most likely to increase the demand for US dollars on the South African foreign exchange market?
[1] a fall in the interest rates in the United States
[2] an expected decline in the value of the rand relative to the dollar
[3] a recession in South Africa
[4] a decrease in international tourism

Suppose that in Zambia, people consume only two goods, peas and beans. Suppose that John, a citizen in that country has an income of ZMW10, the price of beans is 20N per kg and the price of peas is 40N per kg.
a) Suppose that John consumes 30 kg of beans. Assume that he wants to spend all his income, how many kg of peas is he going to consume?
b) Assume that the price of peas falls from 40N to 20N. Assuming that John still consumes 30kg of beans, find the new quantity of peas.
c) After the decrease in the price of peas to 20N, assume that Jonh is just as well off as he was in (a) if he has an income of ZMW7.6. However, with that income and the new price of peas he would have consumed 20 kg of beans. Find the quantity of peas he would have consumed in this case.
d) Find the substitution effect on consumption of peas due to the decrease in the price of peas in (c).
e) Find the income effect on consumption of peas due to the decrease in income in (c).

On the labor market, graph labor demand (Ld) and labor supply (Ls) under conventional assumptions. Discuss briefly what causes movements along each curve. Productivity growth has been very sluggish (small) but slightly positive. At the same time, in a larger change, wealth has fallen and expectations for future real wage are decreasing. Starting from an equilibrium situation in the market, please draw the graph with these movements (define first what is in the “x-y” space) and explain in words what you would expect to happen in the U.S. labor market?

On the labor market, graph labor demand (Ld) and labor supply (Ls) under conventional assumptions. Discuss briefly what causes movements along each curve. Productivity growth has been very sluggish (small) but slightly positive. At the same time, in a larger change, wealth has fallen and expectations for future real wage are decreasing. Starting from an equilibrium situation in the market, please draw the graph with these movements (define first what is in the “x-y” space) and explain in words what you would expect to happen in the U.S. labor market?

The following data is given:
Gross private domestic investment 40
Government purchases of goods & services 30
Gross national product (GNP) 200
Current account balance -20
Taxes 60
Government transfer payments to the domestic private sector 25 Interest payment from government to domestic private sector 15 Factor income received from rest of the world 7
Factor payments made to rest of world 9
Find the following, assuming government investment is zero:
(a) Consumption
(b) Net exports
(c) GDP
(d) NFIA
(e) Private saving
(f) Government saving
(g) National saving

You are given the following information about a closed economy with no government: Consumption = 115 + 0.6Y Investment = 550 Use the above information to answer the questions that follow:
Q.4.1 Calculate the value of autonomous spending. (3)
Q.4.2 Calculate the value of the multiplier. (3)
Q.4.3 Calculate the equilibrium level of income. (3)
Q.4.4 Is the equilibrium level of income also the full employment level of income? Explain your answer. (3)
Q.4.5 Identify any three non‐income determinants of consumption. (3)

You are given the following information about a closed economy with no government: Consumption = 115 + 0.6Y Investment = 550 Use the above information to answer the questions that follow:
Q.4.1 Calculate the value of autonomous spending

Identify any two reasons that US dollars would be demanded in South Africa

An increase in criminal activity in South Africa acts as a deterrent to foreign tourists considering visiting South Africa, and as a result, there is a decline in the number of American tourists to South Africa.
Explain, with the aid of a graph, the effect of this on the rand/dollar exchange rate and the equilibrium quantity of dollars

2. Your options after high school boil down to two:

• Work in a movie theater for $18,000 per year.
• Go to college. Tuitions, fees, and books at college cost $20,000 per year.

You decide to go to college. What is the economic cost (full opportunity cost) of that decision?