Macroeconomics Answers

if a bank has deposits of 100 000 and it can loan out 80 000, but has excess reserves of 5000 what is the required reserves and ratio.
What amount of credit is the bank allowed to give?

a. Is there an apparent relationship between low savings ratios and the ratio of foreign debt
to GDP? Explain.
b. Can a nation fund its investments at a level higher than that currently provided by its
income? Explain.
c. What are the probable longer-term implications of this type of behavior?
d. Is a high savings ratio a requirement for funding a high ratio of investment to GDP over
the longer term? Explain.

Analyse how fiscal policy measures could reduce inflation.

Use the following news clip to work on the following questions:

Debt Reduction at Center of State Election Campaign Queensland business leaders are demanding that the election campaign focuses on reducing a growing debt level and putting the state’s finances back on track. The state’s financial position has been under fire because of a debt blowout caused by the domestic and international market volatility and the natural disasters last year.

a. If reducing debt means spending cuts, will aggregate expenditure fall by more than, less than or exactly the same as the spending cuts? Explain.

b. Explain and draw a graph to illustrate the effects of the events described in the news clip on aggregate expenditure and aggregate demand in both the short run and the long run.

Consider the determination of real exchange rates in a large open economy with a flexible exchange rate regime. If today’s technology increase, e* will
Blank 1
. If tomorrow’s technology is expected to improve, e* will
Blank 2
. If M decreases, e* will
Blank 3
. If the government decreases G1 while keeps G2 unchanged, e* will
Blank 4
.

Note: For each of the above blanks, fill in one of the following three choices: A. increase; B. decrease; C. stay; D. none of A, B, and C.

Define the unemployment rate as UR = U/(M + U) where U is the number of people unemployed in the manufacturing sector, and M is the number of people employed in the manufacturing sector. Then the expected wage in manufacturing can be written as E(WM) = 400(1 – UR).
C Suppose the economy starts out with all 100 workers in agriculture, and then 50 people move from agriculture to the manufacturing sector. Solve for the expected wage in manufacturing, assuming there are 50 people in the manufacturing sector and a legislated minimum wage of $400.
D What is the wage in agriculture with 50 people in the agricultural sector?
E Will more people in agriculture want to move to the manufacturing sector? Why

2. Comparative Advantage.
There are two countries, Absurdistan and Parador, that both produce wine and bread using one input, labor. The production costs for each in good in each country are as follows:
Labor Hours to Produce Absurdistan Parador
Bread (1 loaf) 2 1
Wine (1 bottle) 8 6
Relative price
(loaves per bottle)

a. In the table above, fill in the relative price of wine to bread, i.e. how many loaves of bread would need to be given up to produce a bottle of wine

The optimal allocation of labor between the two sectors is achieved when the marginal product of labor is equalized across sectors, which is also where the curves intersect.

a. What is the optimal number of workers in the manufacturing sector (M)? What is the optimal number of workers in the agricultural sector (A)?

In the labour market for carpenters, the current market clearing wage rate is R800 per day. With the aid of a diagram, discuss the welfare effects of government
Intervention in the form of legislation that sets the minimum wage rate for a carpenter at R1000 per day.

What relationship does the demand for money has with income and interest rate?