Macroeconomics Answers

Using appropriate model, illustrate the effect of an expansionary fiscal policy in an open economy operating in free exchange rate regime .Assume perfect capital mobility. What is the effect if the government uses monetary policy alternatively?

Given a hypothetical economic model 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

U.S. Government price supporters for milk led to an increasing surplus of milk. In an effort to reduce the surplus about a decade ago, congress offered to pay diary farmers to slaughter cows. Use two diagrams, one for the milk market and one for the meat market, to illustrate how this policy should have affected the price of meat. ( Assume that meat is sold in an unregulated market)

(a) An open macroeconomic model for a hypothetical economy is represented as follows

Y= C0 +Io+Go+X0-M, M=mo+m1yd,C=co+c1yd, T=tY and Yd=Y-T

Show that equal change in tax and government expenditure are expansionary to the economy
Derive the equilibrium level of savings in the economy above
Derive the investment multiplier

Suppose you borrow $10,000 from a bank at 5% interest rate for one year and the inflation rate for that year is 10%.
Was this loan advantageous to you or to the bank?

1) The table below provides economic information of Republic of Eastein for 2014
Items Amount ($)

Transfer Payments $1,440
Interest Income $2,900
Capital Consumption Allowance $1,000
Wages $3,200
Gross Investment $3,470
Business Profits $3,900
Indirect Business Taxes $2,900
Rental Income $2,400
Net Exports (Export - Import) $1,120
Government Purchases $4,410
Canadians and firms abroad $1,400
Non Canadians and foreign firms in Canada $700
Household Consumption $7,300

a) Calculate Republic of Eastein’s GDP for 2014 using the expenditure approach.
b) Calculate Republic of Eastein’s GDP for 2014 using the income approach.
c) Calculate Gross National Product for 2014.
d) Determine the Net Domestic Product.
e) Determine the Net Investment.
f) Use the circular flow of money model to explain income approach and
expenditure approach, and relate this to your answers in A and B above.

. If the demand for biscuits rises by 10% in the 6th year, how many oven will be replaced in that year? Please show working.... how is the answer 100*1.1/5 = 22

If the banks decide to hold a lower liquidity ratio, what effect will this have on the banks multiplier?

Peter and Jane receive the same annual income, but Peter , who gets paid monthly, will have a much higher demand for active balances than Jane, who gets paid weekly.

a. Is this statement true ?
b. Justify your answer.