Macroeconomics Answers

You are given the following information about a country:
Billions ($)
Receipts of factor income from the rest of the world 25
Indirect taxes 60
Corporate profits 80
Net interest 15
Depreciation 150
Compensation of employees 850
Net business transfer payments 20
Amount of national income not going to households 100
Proprietor’s income 220
Personal income taxes 200
Rental income 35
Subsidies 30
Payments of factor income to the rest of the world 45
Surplus of Governmental Enterprises 50
Using the information provided on the table above to compute the following (Show your work
and formulas).
a. National Income
b. Gross National Product
c. Gross Domestic Product
d. Disposable Personal Income
Please don't forget the formulas. thank you

Q2. If the consumption function of an economy is given by C=500+0.75Yd and Investment
function is I= 300, then:
a) Derive equation for AD.
b) Determine equilibrium value of output.

a) Two students studying microeconomics are trying to understand why the tangent condition means utility is at a maximum. Let’s listen:
Student A. If a person chooses a point on his or her budget constraint that is not tangent, it is clear that he or she can manage to get a higher utility by spending differently.

Student B. I don’t get it—how do you know he or she can do better instead of worse? How can you help out Student B with a graph?

In the classical model of the labour market, involuntary unemployment will increase if:

Now assume that for some reason Aggregate Demand shifts to the left
(downwards) and suppose wages fully adjust. By using the AS-AD graph, show the
effects of this shift on the equilibrium output and price level in the Short-Run and in
the Long-run.

Now assume that there is an increase in government expenditure (G), an
increase in the labour force and a reduction in oil prices. By using the AS-AD graph,
explain the effects of these changes on equilibrium output and equilibrium price level
in the Short-Run. Explain each step in your graph.

Now suppose government expenditure (G) increases and there is an increase in
the overall price level (P). By using the IS curve and Fed (Central Bank) Rule curve
graph, explain the effect of these changes on the interest rate and output in the ShortRun. Explain each step in your graph.

Suppose there is an increase in interest rate. By using the Aggregate
Expenditure (AE) – Aggregate Output (Y) graph, show the effects of this change on
AE and Y in the Short-Run. Then, show the effect of increased interest rate by using
the IS curve, explain what will happen to the IS curve.

Suppose due to a war in a neighbouring country, the country received refugees
which increased the labour force. Also, there is a huge reduction in global oil prices.
By using the Aggregate Supply curve, show the possible effects of these two changes
on the price level and aggregate output in the Short-Run. Explain each step in your
graph.

Assume company ABC’s only product is priced at K20 per unit
and its variable costs amount to K15 per unit while fixed costs
are K3,600.
a. Compute the quantity required to achieve a profit of K2
per unit (5marks)
b. Define the term: Degree of Operating Leverage and how it
can be computed (5marks)