Macroeconomics Answers

Why was Peru inflation targeting system successful?

How would an inflation targeting system help deal with effects of Brexit?

At a business and professional level, what kind of questions can macroeconomics help you answer?

Consider the following short-run model of equilibrium in the foreign exchange market, money market, and goods market:

(1) R=R∗+Ee−EE,

(2) MsP=L(R,Y),

(3) Y=C(Y−T)+I+G+CA(q,Y−T).

All variables have the interpretation given in class (in particular, q=EP∗P is the country's real exchange rate).

Suppose that the government increases temporarily its spending by ΔG.

a) Explain how the endogenous variables of this model adjust to the new short-run equilibrium.
b) (3′) Y =C(Y −T)+I(R)+G+CA(q,Y −T),
instead of equation (3). Investment is now a decreasing function of the interest rate: when the interest rate increases (decreases), investment decreases (in- creases), all else equal. How does this change affect your answer to question .a)?

Consider the following short-run model of equilibrium in the foreign exchange market, money market, and goods market:

(1) R=R∗+Ee−EE,

(2) MsP=L(R,Y),

(3) Y=C(Y−T)+I+G+CA(q,Y−T).

All variables have the interpretation given in class (in particular, q=EP∗P is the country's real exchange rate).

Suppose that the government increases temporarily its spending by ΔG.

a) Explain how the endogenous variables of this model adjust to the new short-run equilibrium.

b) Suppose now that the government combines the temporary increase in government spending with a temporary increase in the money supply (both occurring at the same time). What can you say about the short-run response of output in this case compared to that in .a)?

c) Explain the intuition behind the difference in the response of output in questions .a) and .b).

Consider the following short-run model of equilibrium in the foreign exchange market, money market, and goods market:

(1) R=R∗+Ee−EE,

(2) MsP=L(R,Y),

(3) Y=C(Y−T)+I+G+CA(q,Y−T).

All variables have the interpretation given in class (in particular, q=EP∗P is the country's real exchange rate).

Suppose that the government increases temporarily its spending by ΔG.

a) Explain how the endogenous variables of this model adjust to the new short-run equilibrium.

b) Suppose now that the government combines the temporary increase in government spending with a temporary increase in the money supply (both occurring at the same time). What can you say about the short-run response of output in this case compared to that in .a)?

Which of following best describes the concept of potential output?

1.the total output that can be produced when all factors of production(land,labour and capital) are fully employed.
2.the total output that can be produced when the economy is in short run economic equilibrium
3.the total output that can be produced in future when technological advances allow a higher level of output.
4.the total output that can be produced if no productive resource (land,labour, and capital) was ever left idle.

The table below shows the total cost (TC) and marginal cost (MC) for Choco Lovers, a perfectly competitive firm producing different quantities of chocolate gift boxes. The market price of a gift box is $5 per box.



Instructions: Enter your answers as whole numbers. For profit per gift box, round your answers to 2 decimal places.



a. Fill in the marginal revenue (MR) and average revenue (AR) columns.







b. Given a price of $5 per gift box, how many gift boxes should Choco Lovers produce?




25
gift boxes



What will be the profit per gift box?


$

c. Suppose that Choco Lovers raises the price of gift boxes to $7 per gift box. How many gift boxes should Choco Lovers produce now?


gift boxes



What will be the new profit per gift box?

At a personal level, what kind of questions can macroeconomics help you answer

C = 100 + 0.8Yd
investment (I) = 200
govt. exp. (G) = 200
export = 1000
import function(M) = 20+0.2Y

(a) Calculate equilibrium income Y
(b) Calculate value of multiplier and equilibrium income if import function (M) = 20+0.3Y