Macroeconomics Answers

decide if you would use Easy-Monetary policy or Tight-Monetary policy. Explain each scenario within 150 words.
Scenarios:
RGDP dropped from 3 percent to 1 percent in the last year.

The CPI and GDP deflator have risen 3 percent in the last six months.

Commercial interest rates are rising, but the SBP has not raised rates.

RGDP is growing steadily, and prices are rising sharply.
Answer:

The Pakistan is experiencing both high inflation and high unemployment.

We are in a recession. Factory orders are down, and the economy appears to be slumping.

Unemployment is low and prices are rising steadily.

Unemployment rates are pushing 11 percent while the CPI has fallen from 8 percent to 2 percent growth.

We are in a recession but are experiencing high inflation.

The money supply appears to be tight, and prices are on the rise.

How can governments play a role in promoting knowledge based industries in which fixed costs are high and marginal costs are close to zero? With an appropriate example.

Given the following model:
Consumption: C = 500 + 0.5Yd
Investment: I = 250
Government Expenditure: G = 100
Proportional Tax Rate: t = 0.1
Imports: M = 0.25Y
Exports: X = 50
Yd: Disposal Income
Y: Real GDP
(Note: There is no lump-sum tax)
a) If the current level of output is 1000, what is the level of actual investment? (2 marks)
b) Calculate the equilibrium real GDP (2 marks)
c) Given your answers to part (a) and (b), explain how the economy will adjust to short-
run equilibrium (3 marks)
d) Calculate the disposal income (Yd) in equilibrium (1 mark)
e) Calculate the multiplier (1 mark)

Briefly explain how the CPI index summarizes all the prices in the economy by using a single number.

Which one of the following is considered brand new resources.
A) raising taxes
B)loweringvthe retirement age
C)building a new factory
D)purchasing of a corporation stock and bond
E)lowering taxes
D)depositing money in a bank

4.1 Assume the aggregate demand of an economy is rising at 3%, but its productive capacity is
only rising at 2%. Discuss the type of inflation this would lead to. Use a diagram to motivate
your answer. (20)
4.2 Explain how fiscal policy can be implemented if an economy is in the downswing of a business
cycle. (15)

The Qd represents the amount consumed of good X. Px is the price of good X, Py, is the price of good Y, M is the level of income, and A is the level of expenditure in the advertisement. Assuming good X sells for P40 per unit and Y sells at P30/unit, the firm uses 4,000 units of advertising, and the target buyer average income is P10,000. How much of good X will consumers buy? Is good Y a substitute to X or complements? Is good X a normal or inferior good?

As a manager how would you strategize in terms of planning, organising, leading and controlling resources (such as finance, employees, equipment, machineries &raw materials)to sustain the business operation amid the covid 19 period until such a time that it improves.

7. The Cobb-Douglas production function and the steady state
This problem is based on the material in the chapter appendix.
Suppose that the economy’s production function is given by
Y = KaN1 - a
and assume that a = 1>3.
a. Is this production function characterized by constant
returns to scale? Explain.
b. Are there decreasing returns to capital?
c. Are there decreasing returns to labor?
d. Transform the production function into a relation between
output per worker and capital per worker.
e. For a given saving rate, s, and depreciation rate, d, give an
expression for capital per worker in the steady state.
f. Give an expression for output per worker in the steady state.
g. Solve for the steady-state level of output per worker when
s = 0.32 and d = 0.08.
h. Suppose that the depreciation rate remains constant at
d = 0.08, while the saving rate is reduced by half, to
s = 0.16. What is the new steady-state output per worker?

Suppose the market for good X has an effective price floor. Then market supply suddenly rise.What impact does this have on the dead weight loss (social cost) caused by the price floor in the market, ceteris paribus?
A) The dead weight loss will be smaller
B)There is no basis for predicting how the change in supply will impact the dead weight loss
C)The dead weight loss will be greater
D)There will be no impact on the dead weight loss