Macroeconomics Answers

A market for electricity is in equilibrium in bangladesh at a point where both supply and demand curves intersect each other. If the following events ( price factors or non price factor of demand or supply) take place into the market of electricity then how it will effect equilibrium point, equilibrium price and equilibrium quantity of electricity in bangaldesh. Use graphical representation for answer your question. Label and interpret each daigram

1.if proportion of general sales tax (GST) on electricity is increased by the govt. of bangladesh

1. Explain the interest rate channel of monetary policy.
2. Explain two goals of monetary policy
3. Discuss two traditional functions of central bank.
4. Explain why the classical economists believe that the economy is always full of employment.

Is saving necessarily invested or not.
How did Keynes resolve this contradiction

How can disagreements over discretionary spending lead to a government shutdown?

Q.2 Under the demand and supply analysis, let us assume that the price of Hard wood is $50 per unit. Now the government has imposed 5 % tax to the seller which increased the cost of production. Explain the following with the help of diagram.

i. Do the cost of production affects Demand and Supply? (explain with the reference of necessities and
Non-essential goods)
ii. Will there be a shift or movement along the supply curve? (explain with the reference of necessities
and non-essential goods)
iii. In order to maintain the same profit as before imposition of tax, how much price the seller should
increase presuming that the a) demand for the product is perfectly inelastic and
b) demand of the product is perfectly elastic
iv. What are the determinants of demand and supply of any product.

Consider an economy where the
current account is negatively affected by a depreciation in the real exchange rate in the short
run (that is, the Marshall-Lerner condition does not hold). Explain the effects of a monetary
expansion in this economy by comparing it to the baseline case where the Marshall-Lerner
condition holds. Use a graphical analysis accompanied by an intuitive (verbal) explanation.
(UPDATE: Assume that the DD curve under the revised assumption will be steeper than the AA
curve.)

For this question assume that the real money demand function is L(R, Y) = kY - hR where
k > 0 represents the sensitivity of the money demand to income and h > 0 represents the
sensitivity of the money demand to the interest rate.
Suppose that the economy of Highland has high k and low h, while the economy of Lowland
has low k and high h. If the two countries are the same other than the above difference,
compare and contrast the short run effectiveness of the fiscal policy in Highland and
Lowland.

Given that IS is Y = 2500-50i, and the interest rate reaction function is ip = 2 + 0.5(P-P*), where ip is the central bank policy rate. Assume that i (interest rate) is 0.5 + ip (interest rate is a wedge over the policy rate). Determine the AD function. If AS function was Y = 0.25(P-P*) + 2000 determine Y* and P* and inflation rate. Assume P* = 105.

Q1. THE FOLLOWING FUNCTIONS ARE GIVEN FOR AN ECONOMY:-
C = 100+ 0.9 YD
I = 600- 30i
T= 1/3 Y
G= 300
MD = 0.4 Y – 50 i
MS = 1040 (NOMINAL MONEY SUPPLY)
P = 2
1. Calculate equilibrium income and rate of interest.
2. Find out the value of simple multiplier.
3. If govt increases its expenditure by 100 units, then what would be the increase in GDP?

Suppose central bank keeps money supply constant. What is the effect of fiscal policy?