Macroeconomics Answers

If the Greek government defaults on its bonds issued by French and German investment banks, how does that prevent the French and German governments from paying back the money that they owe to investment banks in other Euro countries?

a) Discuss the three big macroeconomics questions.


b) Explain the objectives of macroeconomic policy.

Suppose the residents of Vegopia spend all their income on cauliflower (CF), broccoli
(B)and carrots (C). In 2010, the base year, they buy 100 heads of cauliflower for $200,
60 bunches of broccoli for $90, and 500 carrots for $50. In 2011 they buy 75 heads of
cauliflower for $225, 80 bunches of broccoli for $120, and 500 carrots for $100.
(a) Calculate the CPI for (i) 2010 and (ii) 2011.
(b) Calculate the inflation rate.
(a) The CPI in the base year 2010 is 100.
The CPI in 2011 is as follows:
CPI(2011) = Cost of basket at current prices (2011) x 100
Cost of basket at base year prices (2010)
The basket is the base year quantities (ie. CF = 100, B = 60 and C = 500)

Recently in Sweden, due to the discovery of bird flu the demand for live chicken decreased. This was, at the same time, followed by the Swedish government taking precautionary measures and culling 50 percent of the live chicken stock in the country. Using demand and supply graphs illustrate and explain the impact on price and quantity in the market for live chickens?

Increase in demand, decrease in supply. What happens to equilibrium price and quantity?

Peanut crops have been destroyed by a fungus. Consumers are substituting almond butter for peanut butter because they perceive it to be a healthier option. The prices of both peanut butter and almond butter are rising. Why?

A typical family living on Rabbit Island consumes only apple juice, bananas, and cloth. Price in the base year are $4 a litre for apple juice, $3 a kilogram for bananas, and $5 a metre for cloth. In the base year the typical family spends $40 on apple juice, $45 on bananas, and $25 on cloth. In the current year, apple juice cost $3 a litre, banans cost $4 a kilogram, and cloth costs $7 a metre. Calculate the CPI on Rabbit Island in the current year and inflation rate between the base year and the current year.

Suppose that the firm that printed your Macroeconomics textbook bought the paper from XYZ paper mills. Was the purchase of the paper part of the GDP. If not, then how the value of paper was counted in the GDP.

National Income is the total value of all services and goods that are produced within a country and the income that comes from abroad for a particular period, normally one year.

Gross Domestic Product is defined as the value of the goods and services generated within a country.

By definitions, National income= Income from within the country and from abroad. GDP=Income within the country.

Here my doubt is I have seen in some textbooks why national income is referred as GDP and vice versa in measuring of national income?

Suppose a country’s output is below / above the policy-maker’s desired level of output and is experiencing a trade deficit / surplus. Assume the policy-maker’s goals are to achieve the desired level of output (i.e., full employment output) and balanced trade. Given this information, what type of exchange rate and / or fiscal policy can be used to achieve simultaneously these two goals? Explain taking a country’s data into consideration.
The following should be included in your discussion.
1. Identifying economic performance using GDP growth and trade balance.
2. Relevant policy advocates-discussion of fiscal and exchange rate policies.
3. A table with at least GDP, trade balance, budget deficit and nominal or real change rate. Your data cover period 1990 to 2018. Your discussion can be centered on recent years.