Macroeconomics Answers

Suppose the country of Macecon produces only two final goods, Theorems (Ts) and Lemmas (Ls). In 2018 it produced 10 Ts at a price of $50 and 50 Ls at a price of $10. In 2019 it produced 9 Ts at a price of $60 and 60 Ls at a price of $11. Using 2018 as the base year, the inflation rate in the GDP deflator between 2018 and 2019 was 5%.

Welfare effects when wage rate set below equilibrium

True/False . Why?
Suppose the country of Macecon produces only two final goods, Theorems (Ts) and Lemmas (Ls). In 2018 it produced 10 Ts at a price of $50 and 50 Ls at a price of $10. In 2019 It produced 9 Ts at a price of $60 and 60 Ls at a price of $11. Using 2018 as the base year, the inflation rate in the GDP deflator between 2018 and 2019 was 5%.

In a large economy such as ours, it is impossible to simply count how many times each dollar changes hands (velocity). How do we calculate V?

Assuming that South Africa economy experience a high level of inflation. The SARB makes use of monetary policy to decrease the inflation rate.
a. Mention one of the instruments of monetary policy and describe how the SARB will manipulate it.
b. Explain by the use of graphs, the impact of such monetary policy on aggregate output. In your explanation, describe the interaction between the Money market, IS-LM and AD-AS Model.

Assuming that the government decides to address the low level of production and employment caused by COVID-19 by cutting down taxes (personal income and corporate taxes).
Explain by the use of graphs, the impact of such fiscal policy on aggregate output. In your explanation, describe the interaction between the Money market, IS-LM and AD-AS Model

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 the Money market, IS-LM and AD-AS Model.

Assuming that South Africa economy experience a severe recession due to COVID-19. The SARB makes use of monetary policy to increase AD to boost the production level (GDP).
Explain by the use of graphs, the impact of such monetary policy on aggregate output. In your explanation, describe the interaction between the Money market, IS-LM and AD-AS Model

If a R200 billion increases in investment spending creates R200 billion of new income in the first round of the multiplier process and R160 billion in the second round. Calculate:
a. the marginal propensity to consume (MPC).
b. the value of the expenditure multiplier in this closed economy.
3.3 Assuming a private closed economy whereby the marginal propensity to consume is 0.9 and investment spending decreases by R1000 billion. What will be the change on equilibrium GDP?
3.4 Suppose that the real GDP increase by R5,000 billion when government expenditure on the construction of new roads increase by R1,500 billion. What is the value of the marginal propensity to consume?
3.5 Assuming that the central government decides to cut taxes by R100 billion to stimulate the economy. The relevant marginal propensity to consume is 0.6 (60 percent). What will be the impact of such fiscal policy on equilibrium GDP?

Consider the following IS-LM model:
C = Co + c1(Y-T)
I = b0 + b1Y -b2i
M/P = d1Y – d2i
a. Solve for equilibrium output. Assume (Assume c1 + b1 < 1).
Now let investment depend on both sales and the interest rate:
b. Solve for equilibrium level of interest rate.
Let’s go behind the scene in the monetary market. Use the equilibrium in the money market M/P = d1Y – d2i to solve for the equilibrium level of the real money supply.
How does the real money supply vary with government spending?