Macroeconomics Answers

Calculate the equilibrium level of income if C=R100 million + 0,8y and I =R125 million

1.1 Show and illustrate graphically from the national accounts since 2009, the annual
real economic growth rate of the GDP at market prices. Gave the main reasons why
you think it happened. (13)
1.2 Show also what happened to South Africa’s rate of unemployment since 2009. (Hint:
see Reserve Bank Quarterly Bulletin: Key economic indicators) (5)
1.3 From the latest unemployment data explain why the unemployment rate had
increased to 29.0% (5)
2. Government responded against the high levels of unemployment with a job summit in
October 2018. Explain the main reasons that came out of the summit why the high
levels of unemployment in South Africa persists (15)
3. The Current level of inflation in South Africa is 4.5% (June 2019). The Monetary
Policy Committee (MPC) of the Reserve Bank forecasted a certain average level for
2019.
3.1 What is this rate? (1)
3.2 What would be the value of the index at the end of 2019 be if this rate is reached?
(1)

What is GDP

Given the following variables in the open economy aggregate expenditure model, autonomous consumption (co)=200, autonomous investment (Io)=200, government spending (G0)=100, export spending (Xo)= 100, autonomous import spending (Mo)=100, taxes (Tp)=0, marginal propensity to invest (i1)=0.1, and marginal propensity to import (m1) =0.15.
1. if there's an increase in autonomous import expenditure from 100 to 200 resulting from an increase in the currency exchange rate, calculate the new equilibrium level of income and the value of the multiplier.
2.compared with the original equilibrium in part a, if the government decides to impose taxes (Tp) of 100, calculate the new equilibrium level of income. Hint: Remember that consumption has an autonomous component and is function of disposable income, Yd,where Yd =Y-Tp.

Question 6: Complete the below statement:
On February 1, 2017, one U.S. Dollar was worth €0.93. On February 28, 2017, one U.S. Dollar was worth €0.95. During the month of February, the U.S. Dollar _________________ (appreciated, depreciated), and the Euro _________________ (appreciated, depreciated).

Question 7: Suppose that the euro was trading for $1.2 U.S. dollar in June 2015, and then the price of euro increased to $1.5 in June 2016. How would this change affect the U.S. aggregate demand schedule?

Question 8: Suppose you and your parents are watching on TV an interview with a Wisconsin cranberry farmer who exports his produce to Europe. The farmer is cheerfully talking about how good the business has been due to the weak US dollar against the euro. Your parents, who were planning to take a trip to Italy, are very unhappy about the weak dollar and canceled their trip because of it. Why do the farmer and your parents have these two different reactions to the weak dollar?

Question 2: What is the distinction between the government’s budget deficit and the government’s debt?

Question 3: Suppose that there is a decrease in government spending of $70 billion, and that the government spending multiplier is 2. How does the real GDP change? Calculate.

Question 4: Suppose that there is an increase in taxes of $42 billion, and that the tax multiplier is -1.5. How does the real GDP change? Calculate.

Question 5: Suppose that there is an increase in taxes of $16 billion, and that Real GDP decreases by $20 billion as a result. What is the value of the tax multiplier?

Question 2:

Disposable Income= 50
Government Expenditure= 8
Exports= 9
Consumption Expenditure= 35
Imports= 7
Net Taxes= 12
Data above is in millions of US dollars.

a. Based on the data provided above, what is the value of National Income (GDP or Y)?
b. Based on the data provided above, what is the value of Private Savings?
c. Based on the data provided above, what is the value of Government Savings?
d. Based on the data provided above, what is the value of National Savings?
e. Based on the data provided above, what is the value of Net Exports?
f. Based on the data provided above, is this country a net lender or net borrower?

Question 1: Explain how each of the following events affect the supply of loanable funds curve (shift or move):
a) The economy is in a recession so people's disposable income is lower.
b) The stock market is booming so the people's wealth is higher.
c) Fewer college graduates are finding jobs so expected future income is lower.
d) The real interest rate increases.

Briefly explain the concept “monetary policy transmission mechanism” and then illustrate how
changes in interest rates affects any business organisation of your choice. Substantiate your
answer fully.
N.B: 15 marks for the monetary policy transmission mechanism and 10 marks for the effects
on business. On the application to business, you are expected to give a brief background of
the business, the sector it operates, location etc, and then discuss the effects.

Given the following variables in the open economy aggregate expenditure model, autonomous consumption (co)=200, autonomous investment (Io)=200, government spending (G0)=100, eport spending (Xo)= 100, autonomous import spending (Mo)=100, taxes (Tp)=0, marginal propensity to invest (i1)=0.1, and marginal propensity to import (m1) =0.15 calculate the equilibrium level of income for he open economy aggregate expediture model.