Macroeconomics Answers

A government report traces the economy's stagnation in the last 15 months to massive decline in spending on commercial construction, while residential construction grew at only half pace. of recent note, however is a fall in inventories. IN which category or categories of the national expenditures accounts, C, I, G, or X would these spending be recorded?

The comparison of Gross Domestic Product (GDP)between India and Japan,and its reasons.
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For assignment

Assuming that the MPC=.75 and that prices are constant, which of the following fiscal policies would eliminate a recessionary gap of $60 billion maintaining a balanced budget?
A. Decreasing government spending by $60 billion while raising taxes $80 billion
B. Increasing government spending by $60 billion while reducing taxes $80 billion
C. Increasing government spending by $60 billion while raising taxes $60 billion
D.Decreasing government spending by $60 billion while reducing taxes $60 billion
E. Increasing government spending by $60 billion while raising taxes $80 billion

If the economy is near the full-employment level of output the AD/AS analysis of a change in government spending or taxation will be different from the Keynesian analysis.
T or F

Suppose equilibrium savings equals $750 billion, and equilibrium GDP equals $3,500 billion. Investment spending rises to $900 billion, and equilibrium level of real GDP increases by $500 billion. Assuming everything else remains constant, the value of the spending multiplier is:
A. 2.5
B. 1.8
C. 4.4
D. 4.0
E. 3.3

Suppose the current rate of inflation is about 14% and there is an inflationary gap of $150 billion in the economy. Which of the following policies would be most appropriate to reduce inflation if the marginal propensity to save is equal to 0.05
A. Reduce government spending by $30 billion
B. Reduce government spending by $25 billion
C. Reduce G by $7.5 billion
D. Reduce G by $150 billion
E. Reduce G by $50 billion

Two important policy goals of the government and the Fed are to keep unemployment and inflation low, while at the same time making sure that GDP is increasing at an average of 3% per year. It is important to have the right mix of policies and that all the variables be timed perfectly.

Part 1: Assume that the country is in a period of high unemployment, interest rates are at almost zero, inflation is about 2% per year, and GDP growth is less than 2% per year.

Problem 1. You are given the following data about the economy GDP=6000
YD = 5100
Government deficit = G –T = 200
C = 3800 NX = - 100
Find government expenditure (G), Investment (I), Private Savings (SH ) Note: YD is disposable income
Problem 2. You are given the following data about the economy GDP=6000
IG =800
IN =200
C=4000
G=1100
Government surplus=30
Find net domestic product (NDP), net exports, private savings and depreciation Note: IN are net investments (gros investments net of the depreciation)
Problem 3. Consider a closed economy with expenditure totals given by: C = 1200
I = 400
G = 300
F = 200 (transfers) T=400
a) What is GDP?
b) What is private saving?
c) What is public saving?
d) What is total saving? Show that it equals investment.
Problem 4. Now suppose that the economy from Problem 3 is an open one and that NX=-100. Answer questions a-c. Replace question d) by:
d’) We can define Sr=-NX as the rest of world saving. What is total saving now? Show that it equals investment.

If we are at the natural rate of unemployment, an increase in aggregate demand will lower unemployment in the short run

( )if workers perfectly anticipate inflation
( )regardless of workers' inflation estimates
( )if workers overestimate the consequent inflation
( )if workers underestimate the consequent inflation

If rapid inflation occurs in a relatively full employment economy, well-coordinated monetary and fiscal policies would involve a budget
( )deficit and central bank increase in annual bond purchases
( )surplus and central bank increase in annual bond purchases
( )deficit and central bank reduction in annual bond purchases
( )surplus and central bank reduction in annual bond purchases

. Suppose the Fed’s target for the federal funds rate moves from 0.5% (current value) to
2%. Using the appropriate graphs carefully explain:
(a) How can the Fed attain such increase in the FFR? HINT: you have to use the graph for the
(interbank) market of reserves
(b) What is the impact of such change on total spending in the economy? HINT: you have to use the
graph with the total expenditure and the 45 degree line.
(c) What is the impact on equilibrium output Y and the price P? HINT: you have to use the AD-AS
graph.

Assume that the banking system is loaned up and that any open-market purchase by the Fed directly increases reserves in the banks. If the required reserve ratio is 0.2, by how much could the money supply expand if the Fed purchased $2 billion worth of bonds?