Macroeconomics Answers

C=a+MPC*Yd and suppose mpc=0.8,t=0 and m=0

If disposable income increases from $8000 to $8200 billion and the MPC equals .6, then how much has consumption changed?

If Mary James' disposable income increases from $32,000 to $33,000 and her level of saving increases from $200 to $325, what is her MPC?

If disposable income decreases from $6000 to $5000 and MPC equals .80, how much is savings decreased?

Assume that the rate of growth of population equals 0. Suppose that there is a sudden increase in the rate at which capital depreciates. The production function remains unchanged.
1. On a graph, illustrate the effects of this change on the steady-state level of capital per worker if the saving rate remains unchanged.
2. Describe the effect of this change on the Golden Rule level of capital per worker, and explain your answer.

A government is considering paving a highway with a newly developed “wear‐proof” material. Paving the highway could cost $4 billion today but would save $400 million in maintenance costs for each of the next ten years.
a. Use the concept of present value to determine whether the project is worth undertaking if the government can borrow at an interest rate of 4%. Is it worth it if the interest rate is 0%? 8%?
b. A politician says to you, “I don’t care what the interest rate is. The project is clearly a good investment: it more than pays for itself in only 8 years, and the all the rest is money in the bank.” What is wrong with this argument, and why does the interest rate matter?

What do the IS and LM curves signify? Why is it called the neoclassical synthesis?

oba, produce only wheat, 10 tonnes each. The price of wheat in Alberta is $240 a tonne and in Manitoba is $250 a tonne.
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a. Calculate nominal GDP in the two provinces and discuss the results.
b. Imagine a method of calculating GDP that would allow a more accurate comparison between the economic performances of the two provinces. Explain.

What is meant by steady state in the Solow model? Derive conditions for steady state in
an economy. What is the significance of decreasing returns in the Solow model?

1)with the aid of a diagram, explain how an increase in Government spending in a closed economy will affect: the rate of interest; investment; private saving; and national saving.


2)Erehwon is a closed economy that consumes all the goods it produces. In 2016 it produces 50 apples at $1 each and 50 bananas at $1 each. Then in 2017 cold weather causes apple production to double and the price of apples to halve, and banana production to halve and the price of bananas to double. Calculate the percentage change in: nominal GDP; real GDP; the GDP deflator; the CPI.