Macroeconomics Answers

Given a hypothetical consumption function of the form
Y = C + I0 + G0 ,C = α + β Yd Where: Yd = Y – T, Y = Income, T = Taxes
Government spending and investment are exogenously determined at G and I respectively. Assuming this model represent a three sectors economy, determine Investment multiplier, Government spending multiplier and Tax multiplier. If there is an increase in marginal propensity to consumer, how will this affect the national income?

Given a hypothetical consumption function of the form
Y = C + I0 + G0 ,C = α + β Yd Where: Yd = Y – T, Y = Income, T = Taxes
Government spending and investment are exogenously determined at G and I respectively. Assuming this model represent a three sectors economy, determine Investment multiplier, Government spending multiplier and Tax multiplier. If there is an increase in marginal propensity to consumer, how will this affect the national income?

The commercial banks in St. Paul have:

Reserves
$125 million
Loans
$1,875 million
Deposits
2,000 million
Total Assets
$2,100 million

a. Construct the commercial bank’s balance sheet. If you are missing any assets, call them “other assets”; if you are missing any liabilities, call them other liabilities”.
b. Calculate the banks’ reserve ratio.
c. If banks hold no excess reserves, calculate the deposit multiplier.

Draw an aggregate demand and aggregate supply diagram to show an economy operating at full employment.

Show on this diagram and explain the effects on real GDP, price level and the level of employment in the short run and in the long run of a of a significant increase in the price of oil.

fiscal policy needs monetary policy to be fully effective illustrate this statement using the IS-LM MODEL

Given a hypothetical consumption function of the form:
Y = C + I0 + G0
C = α + β
Where: = Y – T
Y = Income
T = Taxes and that:
Compute the equilibrium level of income and consumption

The economy of Uganda has a budget deficit of USH 500B. This deficit is likely to be funded through domestic borrowing and taxation. Using an appropriate model, explain the macroeconomic implications of such a move.

How can I graphically show how a combination of fiscal and monetary policies could be used to reduce output without changing the interest rate?

You are given the following information of commodity market and money market of a closed economy without government intervention.

The commodity market consumption function ​C = 50 + 2Y

​5

Investment function​ I = 790-21r

Money Market:

Precautionary and Transaction demand for money.

MDT =​ 1Y

​6​

Speculative demand

MDS= 1200-16r

Money supply

MS= 1250

1. Determine the;
i) Equilibrium level of income.
ii) Interest rate for this economy.
2. Using a well labeled diagram, Illustrate the equilibrium condition in part i) above.

Given a hypothetical consumption function of the form:
Y = C + I0 + G0
C = α + β
Where: = Y – T
Y = Income
T = Taxes and that:
Compute the equilibrium level of income and consumption