Macroeconomics Answers

1. Discuss, using the IS-LM model, what happens to interest rates as prices change along a given AD schedule. Explain using the diagram. (300-500 words)

2. What is crowding out, and when would you expect it to occur? In the face of substantial crowding out, which will be more successful—fiscal or monetary policy? Explain using the diagram (500 words).

(P.S: I need a detailed answer around 1000 words.)

Discuss, using the IS-LM model, what happens to interest rates as prices change along a

given AD schedule.

1. A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent $40 on juice and $25 on cloth. In the base year, juice $4 a bottle and cloth is $5 a length. This year, juice is $4 a bottle and cloth is $6 a length. Calculate:
2. The CPI basket
3. The CPI in the current year
4. The inflation rate in the current year

1. The IMF forecasted Australia’s real GDP at $A1,730 billion in 2017 and $A1,782 billion in 2018, and Australia’s population at 24.6 million in 2017 and 25.0 million in 2018. Calculate:
2. The growth rate of real GDP
3. The growth rate of real GDP per person
4. The approximate number of years it will take for real GDP per person in Australia to double if the current growth rate of real GDP is maintained.

An economy’s capital stock was $46.3 billion at the end of 2016, $46.6 billion at the end of 2017, and $47.0 billion at the end of 2018. Depreciation in 2017 was $2.4 billion, and gross investment during 2018 was $2.8 billion (all in 2007 dollars).

1. Calculate net investment and gross investment during 2017.
2. Calculate depreciation and net investment during 2018.

In Canada between June and July in 2016, the number of full-time jobs increased by 63,200 while part-time jobs fell by 108,800. The unemployment rate increased from 6.4 percent to 7.2 percent. The labor force participation rate increased from 66.5 percent to 66.6 percent.

i. Explain the link between the rise in the participation rate and the rise in the unemployment rate.

Calculate the nominal GDP for 2016, 2017 and 2018.

Calculate real GDP for 2016, 2017, and 2018.

Calculate growth rate of nominal and real GDP for 2017 and 2018.

Are nominal and real GDPs same for a given year? Please explain. Calculate the inflation rates for 2017 and 2018 using GDP deflator method.

ii. If all the workers who entered the job market were discouraged searches, explain how the R5 unemployment would have changed.

1. What would the LM curve look like in a classical world? If this really were the LM curve that we thought best characterized the economy, would we lean toward the use of fiscal policy or monetary policy? (You may assume your goal is to affect output.) Explain in 250-300 words using the diagram

2. Show, using IS and LM curves, why money has no effect on output in the classical supply case. Explain in 500 words. Use diagram wherever necessary.

1. Discuss, using the IS-LM model, what happens to interest rates as prices change along a given AD schedule. Explain using the diagram.

2. What is crowding out, and when would you expect it to occur? In the face of substantial crowding out, which will be more successful—fiscal or monetary policy? Explain using the diagram.

A company makes two products, A and B. Product A requires 12,5 hours of machining time and 30 minutes of finishing time per unit. Product B requires 10 hours of machining time and one hour of finishing time per unit. There are 10 000 hours and 600 hours available for machining and finishing respectively. Severe material shortages for the two products will limit their production to a maximum of 700 units for product A and 400 units for product B per day. If z and y are the number of units of product A and B produced per day respectively, choose the system of inequalities that describes the process.

1. 12,5x+10y<=10000; 0.5x + y < 600 ; x < 700 y <= 400 x, y >= 0 2. 12, 5x + 10y >= 1000 0.5x+y<600;x<700 y < 400 ; x, y >= 0 3. 12, 5x + 10y < 1000 0.5x + y <= 600 ; x > 700 ; y > 400 ; x, y > 0 4. 12, 5x + 10y < 10000 0.5x+y>=600;x>=700 y<=400; x, y > 0

1. What would the LM curve look like in a classical world? If this really were the LM curve that we thought best characterized the economy, would we lean toward the use of fiscal policy or monetary policy? (You may assume your goal is to affect output.)

2. Show, using IS and LM curves, why money has no effect on output in the classical supply

case.