Macroeconomics Answers

The respective elasticities of demand and supply for a product are -0.55 and 1 .Further,it is
observed that the price of this commodity is 80 whilst the prevailing quantity in the market is
950.
a)By adopting ad demand and supply concept of
Qd=a+bP
Qs=c+dP
Use the information provided to estimate the values of a,b,c and d.

Q. which policy you will use Easy-Monetary policy or Tight-Monetary policy
If The CPI and GDP deflator have risen 3 percent in the last six months.
Explain in some sentences

You are given the following information.

Savings S = 150
Investment I = 100
Taxes T = 250
Government Purchases G = 500

Compute the level of private savings, public savings, and national savings.

: The U.S. government’s “war on drugs” mainly focuses on restricting supply. This drives up prices
and reduces quantity demanded. However, demand for many drugs is price inelastic. That means quantity
demanded does not drop as much as the price rises. The net effect is higher total revenue to drug
producers. Illustrate the said scenario in a graph.

Suppose that in Year 1 a firm produces 5 cars valued at $10,000 each. It has contributed $50,000

to GDP. In Year 2 its contribution is $60,000. Has the firm produced more cars? Why eliminating price

changes allows us to see more clearly whether or not there have been output changes.

Peanut crops have been destroyed by fungus. Consumers are substituting almond butter for peanut butter, because they perceive it to be a healthier option. The prices of both peanut butter and almond butter are rising Why?

To help you to figure this out, draw a supply and demand graph for peanut butter and Almond butter for yourself (not to submit it to me). But, if you can scan it then do that. If not, describe your graphs in words.

Which of the following statements are correct?
1. The difference between government spending and borrowing is called the budget deficit.
2. If government finances part of its spending from borrowing from the central bank, this is called inflationary financing.
3. Expansionary fiscal policy implies that taxes must increase, and government spending must be limited.

Choose the correct answer
An appropriate measure of government’s involvement in economic activity is
[1] the volume of government subsidies.
[2] the total government spending.
[3] the share of government spending in total spending in the economy.
[4] the growth of government spending.

Q-1. You are the new Governor of State Bank of Pakistan after Reza Baqir. For each of the situations listed below, decide if you would use Easy-Monetary policy or Tight-Monetary policy.
Scenarios:
Q-1. (A). RGDP dropped from 3 percent to 1 percent in the last year.
Q-1. (B). The CPI and GDP deflator have risen 3 percent in the last six months.
Q-1. (C). Commercial interest rates are rising, but the SBP has not raised rates.
Q-1. (D). RGDP is growing steadily, and prices are rising sharply.
Q-1. (E). The Pakistan is experiencing both high inflation and high unemployment.
Q-1. (F). We are in a recession. Factory orders are down, and the economy appears to be slumping.
Q-1. (G). Unemployment is low and prices are rising steadily.
Q-1. (H). Unemployment rates are pushing 11 percent while the CPI has fallen from 8 percent to 2 percent growth.
Q-1. (I). We are in a recession but are experiencing high inflation.
Q-1. (J). The money supply appears to be tight, and prices are on the rise.