Macroeconomics Answers

China’s government exempted the micro, small and medium-size enterprises from making employer contributions to pension and work-related injury insurance schemes. Also, allowed the larger enterprises to reduce the same by 50%. (Hint: It will have a direct impact on the cost of employment, or can say will ease enterprises’ cash-flow constraints.) What will happen to the output in China using IS-LM framework.

A government has recently stressed its commitment to the future of youth and accordingly will subsidize you $2 for every $1 you spend on textbooks up to a max of $2100. Your income is $1500 and the price of books is $30 and the price of all other goods is $10. Whats the intercept of the original budget line? What’s the intercept for the budget line if there’s a grant with no maximum? At what point would you obtain max grant? What is the amount of conditional grant?

Assuming that South Africa Economy is over heated (a period of very high level of inflation and production). The government decides to slow down the economy by decreasing public expenditures. Explain by the use of graphs, the impact of such fiscal policy on aggregate output. In your explanation, describe the interaction between money narket, IS-LM and AD-AS Model

Suppose that the economy is characteised by the following behavioral equations C=Co +c1Yd
Where : Co=280
I=270
G=300
T=200
Marginal propensity to save (MPS) is 0.4(or 40%)
Solve for
a) equlibrum Gdp (Y)
b) disposable income (Yd)
C) Consumption spending (C)

1. Suppose the country of Z witnesses an increase in the demand for loanable funds, driven by a recovery from an economic crisis that hit the country few years ago. Will the equilibrium quantities of savings and investment change by more or less than the initial change in the demand? Explain the reasons for the answer.

2. Residents of the land of Q use rubies as money. Every ruby is used, on an average, 4 times per year to carry out transactions. The total supply of rubies is thirty million.
(a) What is the level of aggregate nominal spending in Q according to the quantity theory of money?
(b) Suppose now that the residents of Q use less money to conduct same number of transactions. What is the effect on the velocity of money?
(c) Suppose a new financial product named “bonds” introduced in economy of Q. How the introduction of this new financial product will affect the willingness to hold rubies and consequently the velocity of rubies.

Suppose that the economy is characteised by the following behavioral equations C=Co +c1Yd
Where : Co=280
I=270
G=300
T=200
Marginal propensity to save (MPS) is 0.4(or 40%)
Solve for
a) equlibrum Gdp (Y)
b) disposable income (Yd)
C) Consumption spending (C)

Consider the following information to answer questions Government spending = R550 Exports = R330 Autonomous consumption = R280 Autonomous imports = R170 Investment expenditure = R120 Marginal propensity to consume =0,75 Full employment level of income =R5700

What is the value of the multiplier?
a. 2
c. 2,50
d. 4
c. 3

Assume that American rice sells for $100 per bushel, Japanese rice sells for 16,000 yen per bushel, and the nominal exchange rate is 80 yen per dollar.

(a) If other people exploit the same opportunity, what would happen to the price of rice in America and price of rice in Japan.

(b) Suppose rice is the only commodity in this world and law of one price and Purchasing Power Parity (PPP) theory hold. What would happen to real exchange rate between America and Japan?

Suppose the government decides to pursue an expansionary fiscal policy. Within the AD-AS framework, what will be the impact on the economy?
1.Aggregate supply in the economy will decrease at various price levels.
2.Aggregate demand in the economy will decrease at various price levels.
3.Total production and employment will increase, while inflation decrease.
4.Real GDP, the general level of prices and employment will increase.

the following information is provided: c= 0.8 t= 0.15 m= 0.2 calculate the value of the multiplier based on the provided information for the following economies: 1.1.1 closed economy with no government 1.1.2 closed economy with government and tax 1.1 .3 open economy with a government, tax and induced imports