Macroeconomics Answers

AD shocks can change the equilibrium level of income (Y) and price (P). But the division of effects between P and Y depends on the shape of the SRAS curve. Suppose if there is a contractionary AD shock to economy, using graphs show us what happens to P,Y and the size of multiplier when SRAS is upward sloping

With the aid of illustrations discuss the relationship between a firm’s total revenue curve and demand curve

Following a stock exchange crash in 1987, there was a temporary fear of
a recession because of an anticipated reduction of consumption expenditure.
(a) What was the basis of this fear?
(b) Was the fear justified?
(c) Would things be any different now?

2 Following a stock exchange crash in 1987, there was a temporary fear of
a recession because of an anticipated reduction of consumption expenditure.
(a) What was the basis of this fear?
(b) Was the fear justified?
(c) Would things be any different now?

Fiscal policy can be used in the keynesian model to achieve a higher income level. With the aid of a graph , explain how government expenditure can be used to achieve this higher level of aggregate income

Explain in words what happens to the multiplier when an economy moves from a small closed economy with a government to an open economy. What is the formula for the multiplier in a small open economy?
Does the size of the multiplier increase or decrease?
Show the formula of the multiplier

If a plane has few empty seats before taking off, should airlines sell it below average cost?
Provide a suitable justification

What is real GDP

The following data relates to the market value of economic transactions for the three main sectors of our country's economy.

Sector Value of output Purchases from other Firms
Agriculture 300 160
Manufacturing 200 150
Services 150 120
i. Compute the gross domestic producdt (GDP)
ii. Compute Gross national (GNP) at market prices
iii. Compute Net national Product (NNP) at Market Prices.
iv. Compute Net National Product (NNP) at factor cost.
v. Net domestic product (NDP) at factor cost.

Assume that the market for rental cars for business purposes is perfectly competitive, with the demand for this capital input given by K=1500-25v, and the supply is given by K= 74v-500 where K represents the number of cars rented by firms and v is the rental rate per day. What will be the equilibrium levels for v and K in this market?