Macroeconomics Answers

Central bank can keep either the money supply or interest rate constant. Under which case, will the fiscal policy have the strongest effect on the output and why? Explain using a diagram.

Q – 1: 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 factors of demand or supply) take place into the market of electricity then how it will affect equilibrium point, equilibrium price and equilibrium quantity of electricity in Bangladesh. Use graphical representation for each case separately to answer your question. Label and interpret each diagram.
Incomplete case does not carry marks. (1 x 8)

(i) If proportion of general sales tax (GST) on electricity is increased by the Govt. of Bangladesh.
(ii) When the overall prices of the factors of electricity increase.
(iii) Govt. of Bangladesh opens up doors for Research and development for all the firms to produce cheap electricity in Bangladesh.
(iv) During the new fiscal year; Govt. of Bangladesh has decided to decrease the proportion of direct personal tax.

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)

The following information refers to the spending in Laddacity Country.(All values are in
USD million).
Consumption Function 350+0.65Y d
Investment Expenditure 150
Public Expenditure 250
Tax 20
Net Exports 120

A. Compute the equilibrium level of national income for the above economy?
B. Assuming that full employment would be experienced at an income level of USD3000
million, State the problem this economy is facing, illustrate your answer with a well-
labeled diagram.
C. Using the spending multiplier compute the change in the amount of government
spending that is required to achieve the full employment income level
D. What is the marginal propensity to save (MPS) and the relationship between MPS and
marginal propensity to consume (MPC)?

Why wealth inequalities can magnify the effect of fiscal multipliers effects?

Sally advertises the sale of her used car for $2,000. In this situation, money is serving its function as a .
A. medium of exchange B. store of value
C. unit of account D. means of payment

please explain what happens to economy in the short-run when there is a financial shock that causes the risk premium to increase. Use the appropriate IS-LM model and the relevant graphs to answer this questions.

initially Y=Yn , π =π(-1) and goverment decides to reduce the budget deficit by decreasing government spending.The central bank decreases the policy rate so as to increase output back to potential and realese the deflation ;1) illusturate the short-run and medium-run equilibria using relevant graphs when the zero lower bound is NOT binding.?
2) ıllustrate the short-run and medium-run equilibria using relevent graphs when the zero lower bound is binding.

use the phillips curve to explain the relationship between unemployment and inflation

To what extent high powered money affect money supply?
What are the uses of private savings in economy?