Macroeconomics Answers

"One reason for raising interest rates was the prospect of a refinancing issue: a $12 billion issue matures April 1, and the government is expected to seek some new money, in excess of its refinancing needs."

Why doesn't the government get the central bank to wait until after the refinancing before increasing interest rates, so as to minimize its interest costs?

You are given the data below for 2008 for the imaginary country of Amagre, whose currency is the G.

Consumption 350 billion G
Transfer payments 100 billion G
Investment 100 billion G
Government purchases 200 billion G
Exports 50 billion G
Imports 150 billion G
Bond purchases 200 billion G
Earnings on foreign investments 75 billion G
Foreign earnings on Amagre investment 25 billion G

Compute net foreign investment.
Compute net exports.
Compute GDP.
Compute GNP.

In addition to responding with a quantitative answer, briefly, describe how you arrived at your answers.

2.Assume the following information represents the National Income Model of a hypothetical economy.



Y = C + I + G,C = a + b(Y – T),T = d + tY, I = I0,G = G0

Where a > 0; 0 < b < 1,d > 0; 0 < t < 1,T = Taxes, I = Investment ,G = Government Expenditure

Explain the economic interpretation of the parameters a,b,d and t.
Find the expression of equilibrium income, consumption and taxes

(1) 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?

Assume that a country has a growing budget deficit, carries a very large debt, is in a period of high unemployment with interest rates almost at zero, and annual inflation and GDP growth of about 2%.
What is the first action you would take as the president? Why?
What is the first action you would take as the chairperson of the Fed? Why?
Make sure you include both the positive and negative effects of your actions, and include the trade-offs or opportunity costs.

Assume that a country has a growing budget deficit, carries a very large debt, is in a period of high unemployment with interest rates almost at zero, and annual inflation and GDP growth of about 2%.
What is the first action you would take as the president? Why?
What is the first action you would take as the chairperson of the Fed? Why?

Assume that a country has a growing budget deficit, carries a very large debt, is in a period of high unemployment with interest rates almost at zero, and annual inflation and GDP growth of about 2%.

Suggest how fiscal and monetary policy can move those numbers to an acceptable level keeping inflation the same.

using the simple Keynesian(J.W) model to assess the implication for equilibrium GDP and level of serving at an increase in the serving function. what happens to the level of saving? what would happen to equilibrium income if there is a sustained rise in private investment spending?

assuming that the money market is initially in equilibrium, trace through the effects of a rise in the money supply on the money market on the interest rate and also on out put, employment and the price level

why might it be difficult to establish the extent to which a given rate of inflation is either demand pull or cost pull?