Macroeconomics Answers

. Suppose the economy is operating at the zero lower bound for the nominal policy rate, the economy is operating at potential output in period t, but there is a large government budget deficit. A newly elected government vows to cut spending and reduce the deficit in subsequent periods. Use an IS-MP-PC diagram to answer the following questions:
a. What is the effect of the policy on output in period t+1 (5 marks)
b. What is the effect of the policy on inflation in period t+1 (5 marks)
c. Discuss how to get out of liquidity in such a scenario (5 marks)s
d. Discuss how fiscal consolidation will be difficult in such an environment (5 marks)

A survey was conducted in 2011 to find the distribution of income levels of the people. It was repeated in 2019. What would be the change in the results if we take into account the effect of inflation.

Draw a demand and supply curve for textiles in south africa. Illustrate on the graph how a specific import tarrif will affect the price, quantities consumed, imported and domestically produced.

Draw a demand and supply curve for British pounds (on the vertical axis plot rand per British pound). [10 marks]. What factors are likely to cause an increase in the demand for British pounds (in exchange for South African rands)? [5]. How can this be illustrated in the diagram you have drawn? [3] Does this represent an appreciation or depreciation of the South African rand relative to the British pound?

A decrease in demand for USa dollar in the South-African foreign exchange market would be the result if there is 1) A decrease in the South-African export to the USA.2) A decrease in the gold price to South-Africa,3) A decrease in the South-African tourist to the USA.4) A decrease in the USA tourist to South-Africa.

Draw a Demond and supply curve for textiles in South Africa .illustrate on the graph how a specific import tariff will affect the price ,quantities consumed ,imported and domestically produced

m1 definition

14. Within the open-economy version of the Keynesian model, including taxes (see question 13), suppose there is an autonomous increase in imports of 20 units [ u in equation (5.25) rises by 20]. To counteract the effects of this contraction in domestic aggregate demand, assume that the government cuts taxes by 20 units. Will equilibrium income rise or fall? By how much? Explain.

13. Suppose that within the open-economy version of the Keynesian model in Section 5. 7, we now include taxes. Disposable income (YD = Y - T) therefore replaces GDP ( Y) in the consumption function (5.24). Compute the expression for equilibrium income for this version of the open-economy model. Compute an expression for the tax multiplier (Y>T) in the model.