Macroeconomics Answers

Hey! I'm currently studying A Level Economics. We're researching inflation right now, and one thing has confused me!

What is the difference between CPI and RPI??

Are there also measures called CPIX and RPIX too?
If so, what are these?

The internet seems to conflict on answers to these questions and my textbook doesn't mention the CPIX/RPIX at all.

Thanks!! :)

Assume, in an industry where firms are making an economic profit, the creation of an internet platform has broken down all entry barriers and resulted in a huge increase in the number of firms entering the industry. What will be the implication on profit to the existing firms in this industry? Support with graphical demand and supply analysis.

Using the below parameters calculate what is the budget surplus/deficit first a)in a closed economy with a government and b)in an open economy with a government.
(Note = C=autonomous consumption, I=Investment, G is government expenditure, X is exports, t is tax, Z is imports, Y is income.

C = 100 + 0.4Y
I = 300
G= 200
X = 300
T = 0.2
Z = 0.4

Please show workings. The answer for a) is 23.53 surplus and the answer for b) is also 23.53 surplus. However i am unclear how they got to this answer. Please assist . Thank you

Suppose that the nominal interest rate and expected inflation both increase by 3%. These equal increases in the nominal interest rate and expected inflation will cause:

d. With the nominal wage fixed at $38, the price of widgets doubles from $5 each to $10 each. What happens to Acme's labor demand and production?

c. Graph the relationship between Acme's labor demand and the nominal wage. How does this graph differ from a labor demand curve? Graph Acme's labor demand curve.

e. With the nominal wage fixed at $38 and the price of widgets fixed at $5, the introduction of a new automatic widget maker doubles the number of widgets that the same number of workers can produce. What happens to labor demand and production?

With open market operations the fed buys of sells fed funds and government debt in the open market. If the Fed buys a large amount of treasury bills and bonds what change would you expect in the money supply in ingest rates and in inflation. Would money supply increase or decrease. Would Intrest rates increase or decrease. Would inflation increase or decrease. Why and how is money supply changing.

The economy is in long-run equilibrium. Draw a basic aggregate demand and supply graph (with SRAS and LRAS) that shows the economy in short and long-run equilibrium.

Fort Inc., competes against many other firms in a industry. Over the last decade, several firms have entered this industry and, as consequences, Fort is earning a return on investment that roughly equals the interest rates. Furthermore, the four-firm concentration ratio and Herfindahl Hirschman index are both quite small. Based on this information, which market structure best characterizes the industry in which Fort competes? Explain the characteristics this market structure and what happens to the Fort Inc’s profit in the short-run and long-run. What are your strategic advices to Fort Inc. to sustain its profit in the long-run?

Suppose that a foreign company withdraws money from its account in a foreign country, buys 1 million US dollars and deposits this into the US banking system. The target reserve ratio is 10% and there is no currency drain from the banking system.
ALL BANKS HAVE
Reserves $90 million,
deposits: 900 million
Loans: 710 million
securities 100 million

What are the target reserves and what are the excess reserves?
After 1 million deposit what are the target and excess reserves?
All excess reserves are used to expand loans, the final increase in the money supply will be _?_ times the new 1 million deposit, which is equal to _?_
What is the final increase in loans?

A certain town in a state obtains all of its electricity from one company, South Electric. Although the company is a monopoly, it is owned by the citizens of the town, all of whom split the profits equally at the end of each year. The CEO of the company claims that because all of the profits will be given back to the citizens, it makes economic sense to charge a monopoly price for electricity. Do you agree with the CEO’s argument? Give reasons. What are the social costs of monopoly power? What are the measures do you suggest to control monopoly power?