Macroeconomics Answers

Discuss the gross domestic product of Thailand and the current economic challenges faced by Thailand and reccmmend ways to overcome the problems.

Main objective of trade after the second world war were

(A) westernization government's breakaway from protectionist measure
(B) reduction of governments intervention in the economy
(C) relieving the colonies from domination and control
(D) lift the ban on foreign and local currency trading

Choose the correct answer

1. A,B and C
2. A,B and D
3. A,C and D
4. B,C and D

3. According to the Okun’s Law, when the unemployment rate increases by 1 percentage point the GDP falls by approximately 2 percentage points. But our intuition suggests that it should be rather 1-to-1 relationship, i.e., when the unemployment rate increases by 1 percentage point the GDP should fall by approximately 1 percentage point:
For instance, you have 100 workers who sew jeans, each makes 10 pairs of pants per day; then your total production is 1,000 pairs of pants per day. If you lost one worker (a 1% decrease), the remaining 99 would together make 990 pairs of pants per day (a 1% decrease).
Explain why the decline in output (GDP) may not be proportional to reduction in the number of workers employed (increase in unemployment).

2. The firm’s marginal product of labour is given by MPL = 12 – 0.02L, where L is the number of workers employed by the firm.

a. If the firm’s product sells at price P = $10 per unit, how many workers would the firm employ at the market wage rate w = $12?

b. If the firm’s product sells at price P = $10 per unit, how many workers would the firm employ at the market wage rate w = $13?

c. Use your answers to the previous 2 questions to calculate the (arc) wage rate elasticity of demand for labour (if the firm’s product sells at price P = $10 per unit).

1. The individual supply of labour is given by the following equation:
w = 8 + 0.05L
where w is the wage rate ($/hr) and L is the number of hours (per week) that a worker would choose to work.
At w = $14/hr, what is the worker’s economic rent ($/week)?

Which combination of policies would be the most expansionary?
A) an increase in government spending and taxes
B) a decrease in government spending and taxes
C) an increase in government spending and decrease in taxes
D)a decrease in government spending and an increase in taxes

An advantage of fixed exchange rates is that :
A) they maintain stability of a nation’a foreign reserves
B) they minimize the risk of finincial crises
C) they facilitate foreign trade by making contact prices more predictable

The J-curve model implies :
A) an immediate correction of the current account deficit
B) a deterioration of the capital account
C) none of the above

Suppose the ECB makes an open market purchase of 15 bln euro in bonds. Assume the money multiplier is equal to 3. What is the change in the money supply?

Marginal propensity to save is 0.3. Calculate MPC and the expenditure multiplier.