Macroeconomics Answers

Explain, with the aid of an example, why under a flexible exchange rate Canada can have lower interest rates than the United States.

If the federal reserve increases interest rates does this affect aggregate demand or aggregate supply? increases or decreases?

Suppose the United states experiences stagflation where price level and inflation increase. in the forex market, will the supply of usd increase due to an increase in imports of cheaper foreign goods, or will the supply decrease due to the increased unemployment?

A perfectly competitive labor market where Ld represents the quantity of labor demanded, Ls the quantity of labor supplied and W the wage rate, is described by the following functions:

Ld= 200-2.5W

Ls= -70+5W

Ld=Ls

a. What is the equilibrium wage rate in the market?

b. How many workers will be employed?

c. Suppose the government sets a minimum wage of 48 in the market. What will be the effect of introducing minimum wage?

d. What was the wage bill before the introduction of the minimum wage?

e. What will be the wage bill after the introduction of the minimum wage?

A private college adds a small café to its building to cater to the needs of its
own students. The total cost of the facilities for the café is $100,000. After a
year of operations the college determines that operating the café is interfering with its primary business of educating students. A group of enterprising business students offer to purchase the café facilities for $50,000. The college balks at the idea because it had paid $100,000 for the facilities. The college spends $10,000 advertising the café for sale hoping to get an outside buyer willing to pay much more than the students and operate the café on campus. When no outside offer was forthcoming the students increased their offer to $55,000. Should the college take the students’ offer? Why or why not. (10 marks)

In Goa, India, the multiplier effect of iron ore exports is calculated to be 1.62.Vidyut Kumar Ta, “Iron Ore Mining Gives Impetus to Goa’s Economy,” Times of India, April 30, 2003. Calculate the impact of an additional 1,000 rupees of iron ore exports on the economy of Goa.

Which of the following measures is associated with an expansionary fiscal policy?
a. ​lowering consumption
b. ​lowering taxes
c. ​lowering government purchases
d. ​decreasing investments

Why cant we use balance of payment in real terms like the amount of goods traded between countries? This would be similar to how aggregate demand is in real terms

derSuppose an economy is initially in equilibrium at $800 billion and investment increases by $10 billion. This causes the economy to expand to $1200 billion. Calculate the value of the multiplierive the equation for consumption function.

derive the equation for consumption function.