Macroeconomics Answers

What combination of monetary and fiscal policy should the government use if it wants to reduce the budget deficit, but without reducing the output? Explain using a diagram.

Kirkland is a small country described by the following, Y =8000;G=2500;T =2000;
C = 1000 + .66(Y − T )
I = 1200 − 100r
Y =C+I+G
(a) For Kirkland, compute private saving, public saving and national
saving?
(b) Find the equilibrium interest rate?
1
(c) Suppose G is reduced by 500, compute private saving, public sav- ing and national saving?
(d) Find the new equilibrium interest rate?

A. To be counted into the pool of unemployment, a person must be
1. any age above 15 years
2. discouraged work seeker
3. economically active
4. hired and looking for a second job
B. Unemployment can decrease if
1. there is an economic recession
2. education system improves
3. investment spending increase
4. aggregate demand decrease
C.The original Phillip curve
1. indicates the inverse relationship between the inflation rate and the unemployment rate
2. Illustrate the positive relationship between the inflation rate and the unemployment rate
3. shows the phenomenon stagflation
4. shifts to the right when aggregate demand increases

A. If AS curve shifts to the left as productivity decreases, it will result in a combination of
1. lower output, higher unemployment, and higher inflation
2. lower output, lower unemployment, and lower inflation
3. higher output, lower unemployment , and lower inflation
4. higher output, higher unemployment and higher inflation.

B. Inflation is likely to
1. reduce the cost of living
2. raise the standard of living
3. reduce the purchasing power of currency
4. increase the purchasing power of a currency
C. In AD-AS model, an expansionary fiscal policy may lead to a
1. rightward shift of aggregate demand and demand-pull inflation
2. leftward shift of aggregate demand and demand-pull inflation
3. rightward shift of aggregate supply and cost- push inflation
4. leftward shift of aggregate supply and cost-push inflation

If you were following into current year:

the budget deficit is 3% of the GDP.

the real economic growth is 6%

unemployment rate is 3,5%.

supply of money is growing at constant rate of 3,5% per year.

demand for money is constant

price of oil increased by 9%

the deficit of the balance of trade is 7% of the GDP

Based on the quantity theory of money the inflation rate is ____%?

Kofinatland is a hypothetical economy with the following
economic indicators:
. Size of population: 8 million
. GDP at market price (GDP at m.px.): US $570 billion
. Subsidies: US $50 billion

. Interest paid by consumers: US $27 billion
Employees contribution to social insurance: US $200
billion
Net factor income from abroad (NFYFA): US $200
billion

Capital consumption allowance (CCA): US $80 billion
. Human development index (HDI): 0.91
Indirect taxes on goods and services (ITGS): US $120
billion
. Life expectancy rate: 87 years

. Government transfer payment: US $71.5 billion
Factor income of foreigners in the economy (FYF): US
$80 billion
. Natural population growth rate: 0.5%.

Determine the economy's:
i. Net national product at market cost (NNP at m.px)
ii. Net national product at factor cost (NNP at f.c.)
ii. Factor income of nationals abroad (FYN).
iiii. GDP per capita (note to use the GDP at m. px. in your

If nominal GDP rises, then so must real GDP. true or false

A. Which of the following best describes the relationship illustrated by aggregate demand (AD) curve?
1. The inverse relationship between price and quantity demanded for any product
2. The negative relationship between the price level and levels of total production
3. It shows no relationship between the price level and real GDP
4. The inverse relationship between the price level and real output demanded

B. Based on the international trade effect, how would an increase in the price level in South Africa affect the exchange rate and aggregate demand?
1. rand will appreciate, the quantity of aggregate demand will decrease
2. rand will depreciate, the quantity of aggregate demand will increase
3. exchange rate will remain unchanged, the aggregate demand will decrease
4. exchange rate will increase, the aggregate demand will increase

C. Aggregate spending will increase if
1. real wealth falls
2. Interest rate falls
3. consumption falls
4. investment falls

Suppose that initially the Turkish economy is in medium run equilibrium where Pe=P and Yn=Y. Consider the developments in the economy due to Covid19 epidemic. These will effect both the aggregate demand and supply. Investment and consumption are decreasing as well as the production of many sectors. Unfortunately, the supply side model we use in this class is very simple. However, you can consider this as a case of an increase in z in the wage setting equation.
Initially ignore the policy responses, i.e assume that there is no change in G and T as well as the Central Bank behavior.

a.Explain the effect of these developments on the good and money market. Specifically refer to the equations and explain how each equation will be effected.

b.Graphically show the impact of the same developments by using an IS-LM graph, and explain your graph.

Suppose that initially the Turkish economy is in medium run equilibrium where Pe=P and Yn=Y. Consider the developments in the economy due to Covid19 epidemic. These will effect both the aggregate demand and supply. Investment and consumption are decreasing as well as the production of many sectors. Unfortunately, the supply side model we use in this class is very simple. However, you can consider this as a case of an increase in z in the wage setting equation.
Initially ignore the policy responses, i.e assume that there is no change in G and T as well as the Central Bank behavior.
Q) Graphically show the impact of the these developments by using an AD-AS graph, and explain your graph. What is the impact of these developments on the unemployment level, and income?