Macroeconomics Answers

How to fing government expenditure from budget deficit

. Which of the following statements is/are correct regarding unemployment in the Keynesian and the AD-AS models?

a. In the production function, all the inputs are assumed to be fixed. b. The slope of the production function increases as the level of employment decreases. c. An increase in the real production always implies that unemployment rate will decline.

[1] b [2] a. [3] b and c. [4] a and b. [5] none of the above statements

4. Among the four economics shocks listed below, you must comment on each shock by stating which shock is the most preferred and the least preferred from the point of views of the economic policy advisors. If unclear (ie, cannot clearly say whether more or less preferred), state unclear and explain why. To answer, fill the cells marked with? in the following table.

Hints: Start from the situation where the economy is at potential output and then think about the shocks. No need to draw the AD-AS figure. Also, no need to comment on the policy reaction to each shock (that is beyond the coverage of this assignment).

Positive supply shock. Comment ?
Negative supply shock Comment ?
Positive demand shock. Comment ?
Negative demand shock. Comment ?

Q.1 The following is a list of national income accounts of Pakistan for a given year. All figures are in billions.
Transfer payments by the government 586
Rental income of houschold sector. 200
Imports 594
Personal consumption expenditure 3227
Gross investment 766
Interest income eaned by household sector 211
Proprietor's Income 325
Social security contribution by households 290
Compensation to employees 2845
Dividends 126
Exports 500
Sale Taxes 392
Saving by business sector 57
Government purchases of goods and services 964
Personal income taxes 590
Net private investmet 260
Saving by households 146
Interest paid by the household 100
Corporate profit tax 141
Net income earned by foreign factor of production in Pakistan 60
Calculate GDP by expenditure approach and then GNP, NNP, NI, PI and DI. Also calculate only national income by factor cost (income) approach.

what is macroeconomcs

What is ear making?

2. Do you think that inflation imposes a net cost to the economy after considering the gains and loss? If so, which type of cost? Discuss each scenario below.
a) (1 mark) Nobu gets paid more frequently and thus has to make more trips to the banks down the road, when inflation is expected to be high.

b) (1 mark) Nobu gets reimbursed by RMIT for his work-related expenses. However, sometimes it takes longer time to reimburse him (quite often in reality). When inflation is expected to be high, he is less willing to travel for his job.
Answer:

c) (1 mark) Responding to unexpectedly high inflation, the manager of the Sofitel Hotel must reprint and resend expensive coloured brochures correcting the price of the accommodation in this season.

For the following statements, state Agree or Disagree. And provide brief explanations:

More than a half of the money issued by the government is actually held by people in foreign countries. Australia is hence less than half as wealthy as government statistics indicate’

The residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In 2016, they spend a total of $210 for 100 heads of cauliflower, $70 for 50 bunches of broccoli, and $45 for 450 carrots. In 2017, they spend a total of $225 for 90 heads of cauliflower, $112 for 80 bunches of broccoli, and $120 for 400 carrots.
Complete the following table by calculating the price of one unit of each vegetable in each year.
Year
Cauliflower
Broccoli
Carrots
2016
2017
Using 2016 as the base year, the CPI for 2016 is , and the CPI for 2017 is .
The inflation rate in 2017 isusing the CPI.

Explain whether each of the following government
activities is motivated by a concern about
equality or a concern about efficiency. In the
case of efficiency, discuss the type of market
failure involved.
a. regulating cable TV prices
b. providing some poor people with vouchers
that can be used to buy food
c. prohibiting smoking in public places
d. breaking up Standard Oil (which once
owned 90 percent of all oil refineries) into
several smaller companies
e. imposing higher personal income tax rates
on people with higher incomes
f. instituting laws against driving while
intoxicated