Macroeconomics Answers

Explain the variables included in national income?

"Review the past four monetary policies of RBI and comment on their appropriateness.

1)Collect information about what happened in the last 4 monetary policies. Information about changes in CRR, SLR, Repo rate, reverse repo rate or any other instrument that was changed.
2)Collect information on economic indicators like inflation rate, interest rate, current account deficit, IIP,PMI, changes in stock market, FDI inflows etc.
3)Evaluate the appropriateness of each monetary policy with the respective preceding business environment in terms of inflation, interest rate, current account deficit etc.
The report should not exceed 15 pages."

Felix is a wheat farmer who has two fields he can use to grow wheat. The first field is right next to his house and the topsoil is rich and thick. The second field is 10 miles away in the mountains and the soil is rocky. At current wheat prices, Felix just produces from the field next to his house because the market price for wheat is just high enough to cover his costs of production including a reasonable profit. What would have to happen to the market price of wheat for Felix to have the incentive to produce from the second field?

In 2008 stock markets around the world lost value the following percentage falls in stock market indices between the start of the year and the beginning of October

Country %fall
New Zealand 27.05
Canada 27.30
Switzerland 28.42
Mexico 29.99
Australia 31.95
Korea. 32.18
United kingdom 32.37
Spain. 32.69
Malaysia 32.86
Argentina 36.83
France 37.71
Israel 37.84
Germany 37.85
Taiwan 38.79

What are the mean and median percentage for these countries ?
What are the first and third quartiles ?
Doo data contains any out layers ?
What percentile would you report for Germany ?

The Canadian consumer confidence rebounded sharply in September 2012. This is a significant rebound since the plunge in October 200. According to some analysts, the good news from Europe and the jump in the stock market appear to have had an effect on Canadian consumer confidence.
a. Explain the various factors that buoyed the Canadian consumer confidence in 2012.
b. Explain and draw a graph to illustrate how a rise in consumer confidence can change real GDP and the price level in the short-run.
c. If the economy was operating at full-employment equilibrium, describe the state of equilibrium after the increase in consumer confidence. In what way might consumer expectations have a self-fulfilling prophecy?
d. Why do changes in consumer spending play such a large role in the business cycle?
e. Explain how the economy can adjust in the long-run to restore full-employment equilibrium. Draw a graph to illustrate this adjustment.

Assume that risk neutral investors decide whether to invest in a risk-free bond with interest rate i0 or a government bond with default risk. With probability ω investors lose their investment in the government bond (including the interest payment). With probability 1 − ω investors receive interest rate i. Mark the correct statements.
In addition, suppose that the default risk of the government bond is increasing in the interest rate as follows: ω = ω0 + βi.

5. Assume that ω0 = 0, β = 1 and i0 = 0. Mark the correct statements.

(a) There are multiple equilibrium interest rates i for government-bonds. (b) There are exactly two equilibrium interest rates i.
(c) There is a unique equilibrium interest rate i = 0%.
(d) There is a unique equilibrium interest rate i = 100%.
(e) There are two equilibria: i = 0 % and i = 100 %.


I get 0% but others think also 100% is correct,, but if you set in the equation .. 100% isnt possible.. Or could someone help me with formula?

Transfers to households are given by V and their ratio to GDP is denoted by v. What is then the dynamic equation for public debt ratio?
(a) ∆b=g−t+(r−y)b
(b) ∆b=g−v−t+(r−y)b
(c) ∆b=g+v−t+(r−y)b
(d) ∆b=g−t+(r−y−v)b
(e) ∆b=g−t+(r−y+v)b

Assume that risk neutral investors decide whether to invest in a risk-free bond with interest rate i0 or a government bond with default risk. With probability ω investors lose their investment in the government bond (including the interest payment). With probability 1 − ω investors receive interest rate i. Mark the correct statements.
In addition, suppose that the default risk of the government bond is increasing in the interest rate as follows: ω = ω0 + βi.

5. Assume that ω0 = 0, β = 1 and i0 = 0. Mark the correct statements.

(a) There are multiple equilibrium interest rates i for government-bonds. (b) There are exactly two equilibrium interest rates i.
(c) There is a unique equilibrium interest rate i = 0%.
(d) There is a unique equilibrium interest rate i = 100%.
(e) There are two equilibria: i = 0 % and i = 100 %.

For the next two questions, assume that risk neutral investors decide whether to invest in a risk-free bond with interest rate i0 or a government bond with default risk. With probability ω investors lose their investment in the government bond (including the interest payment). With probability 1 − ω investors receive interest rate i. Mark the correct statements.

4. The arbitrage equation of investors can be written as:

(a) (1+i)=(1−ω)(1+i0)
(b) (1+i0)=(1−ω)(1+i)
(c) ω+i0 =(1−ω)i
(d) i = i0+ω 1−ω
(e) i+ω=(1−ω)i0

An economic fluctuation is a change in the national (“macro”) economy. Which of the answer choices best represents an economic fluctuation?
A.

The rate of inflation in the U.S. increases by 25 percent in one month.
B.

The Federal Reserve decreases the discount rate by two basis points.
C.

McDonald’s expands its dollar menu to include five new items.
D.

Amazon decreases the price of its 8-inch Kindle tablet by $100.