Macroeconomics Answers

Question 1: Consider the DMP model. Low unemployment is a commonly pursued goal of governments. A subsidy, s, given to firms to encourage more hiring is a policy option that can be implemented with the intended goal of increasing employment and reducing the unemployment rate. (16 marks)
a) What is the firm’s surplus, consumer/worker surplus and total surplus with the introduction of a subsidy?
Where z is total revenue brought in when a worker and firm are matched and together thy produce z, w is the wages paid to the workers and b is benefits/employment insurance received by workers.
b) Using Nash Bargaining what is the real wage solution?
c) Determine the equation that determines the supply side of the market V(Q) and the demand side of the market, em(1/j,1).
d) Solve for equilibrium and show it graphically.
e) What is the impact of the subsidy (s) on labour supply (Q) and labour market tightness (j), the real wage (w) and the unemployment rate (u)?

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

Consider the following numerical example of the simple Kenesian model with no government spending,taxes or a foreign sector (all figures in R millions):
C =100 + 0,9Y
I = 50
Answer the following questions.
1. What is the value of the marginal propensity to consume(MPC) in this model?(2 marks)
2. Use a graph to illustrate the equilibrium level of output (5 marks)
3. Calculate the equilibrium level of output. (5 marks)

Uk's real GDP was 1 360 trillion pounds (£) in 2009 and 1 434 trillion pounds in 2010. Uk's population was 191.5 million people in 2009 and 193.3 million in 2010.
Calculate:
1. The economic growth rate .(3 marks)
2. The growth rate of real GDP per person .(5 marks )
3. The approximate number of years it takes for real GDP per person in the Uk to double if the 2010 economic growth rate and population growth rate are maintained. (4 marks)

The people on thohoyandou island buy only juice and cloth .the CPI basket contains the quantities bought in 2010. The average households spent $60 on juice and $30 on cloth in 2009 when the price of juice was $2 a bottle and the price of cloth was $5 a meter. In the current year, 2010 , juice is $4 a bottle and cloth is $6 a meter .
Calculate :
1. CPI per basket and
2. The inflation rate

Calculate
1. The unemployment rate (2 marks)
2. Labour force participation rate(2 marks)
3. Absorption rate (2 marks)
Given the following:
Statistics south africa reported the following data for 2012. Labour force 17948 000 , Employment 13 422000 , working age population 32 786 000.

1. Explain how the inflation rate ,that is usually reported every month in the media, is obtained. Use hypothetical figures for calculations.

Consider the following numerical example of the Keynesian model with no government spending ,taxes or a foreign sector (all figures in R millions):
C = 100 + 0,9Y
I = 50
Answer the following question.
1. What is the value of the marginal prosperity to consume (MPC) in this model? (2 marks)
2. Use a graph to illustrate the equilibrium level of output. (5 marks)
3. Calculate the equilibrium level of output. (5 marks )
4. In equilibrium ,what is the value of consumption spending?use this number to verify that the sum of C and I in equilbrium equals the value for equilbrium output you obtained above(2 marks)
5. What is the value of the. Multiplier in this economy?(1 mark)
6. Suppose the level of output that creates full employment in the economy is 1800. Using the multiplier,determine the level of investment spending that would create full employment in the economy. (3 marks)

1. Calculate the equilibrium level of income if C=R100 million +0,8Y and Ī =R125 million .

2. Consider the following numerical example of the simple Keynesian model with no government spending, taxes or a foreign sector (all figures in R millions):
C = 100 + 0,9Y
I = 50
Answer the following questions.

What is the value of the marginal propensity to consume (MPC) in this model? [2]
Use a graph to illustrate the equilibrium level of output. [5]
Calculate the equilibrium level of output.[5]
In equilibrium, what is the value of consumption spending? Use this number to verify that the sum of C and I in equilibrium equals the value for equilibrium output you obtained [2]above.
What is the value of the multiplier in this economy?[1]
Suppose the level of output that creates full employment in the economy is 1 800. Using the multiplier, determine the level of investment spending that would create full employment in this economy.[3]