Macroeconomics Answers

Consider the consumption function below and answer the questions that follow: C= 40 + 0.25YD

1.1. Sketch the above function on a graph (5) 1.2. What is the value of autonomous expenditure? (2) 1.3. What is the gradient of the consumption function? (2) 1.4. What is the value of total consumption if disposable income is R2500?

Firm X Strategy
High-price Low-price
High-price X = $200
Y = $200 X = $250
Y = $ 50
Low-price X = $ 50
Y = $250 X = $ 50
Y = $ 50


Firm Y Strategy


3.1. Situation 1: Each firm chooses a high-price strategy. Result: Each firm will earn $______ million in profit for a total of $______ million for the two firms.
3.2. Situation 2: Firm X chooses a low-price strategy while Firm Y maintains a high-price strategy. Result: Firm X will earn $_______ million and Firm Y will earn $_______ million. Compared to Situation 1, Firm X has an incentive to cut prices because it will earn $_______ million more in profit and Firm Y will earn $_______ million less in profit. Together, the firms will earn $_______ million in profit, which is $_______ million less than in Situation 1.

The consumption function is a formal representation of

Explain briefly why Malaysian and Thailand can practice price discrimination.

how saving contributes to economic growth

What is the GDP deflator, and how does it differ from the consumer and producer price indexes? Under what circumstances might it be a more useful measure of price than the CPI and PPI?

If real interest rate is 4 per cent, and inflation is 7 per cent, what is the value of nominal interest rate?

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

Suppose autonomous expenditure increases by 1 trillion, and as a result, equilibrium income increases by 3 trillion, what is the value of the multiplier?

Using the Keynesian transmission mechanism, illustrate and explain the effect of an decrease of repo rate in the economy