Macroeconomics Answers

If the price of the good represented on the Y axis increases by 15 percent, that represented on the X axis increases by 5 percent and nominal income increases by 10 percent.

A The budget constraint will shift inward and become flatter
B The budget constraint will shift inwards and become steeper
C The budget constraint will rotate and become flatter
D The budget constraint will rotate and become steeper

the fluctuations in the level of economic activities of a country over time are often best illustrated by business trade cycles. elaborate the role of government in dealing with the periodic fluctuations of economic activity over time

You are given the following information about the commodity and Money markets of a closed economy without government intervention.

The commodity market
Consumption function: C = 50 + 2/5Y
Investment function: I = 790 – 21r
The Money Market
Precautionary and Transactions demand for money: MDT = 1/6 Y
Speculative demand for money: MDS = 1200 -18r
Money supply: MS = 1250
Required:
(i) Determine the equilibrium levels of income and interest rate for this economy.
(ii) Using a well labelled diagram, illustrate the equilibrium condition in part (i) above.
1. (b) Discuss clearly any two instruments of monetary policy that the Central Bank can use to meet monetary policy objectives

Since September 2014 the euro has devalued 20% against the US dollar (from 1.3 to 1.05$/€), and then regained some value in April 2015 back to a peak of 1.15$/€. After that event, the euro has dropped again to 1.1$/€. What is the likely range of value of the EUR/USD in October 2015

(a) Describe what is meant by the marginal propensity to consume (mpc) and give its formula.

Distinguish between demand pull and cost push inflation. Why might it be difficult to establish the extent to which a given rate of inflation is demand pull or cost push?
(4 marks)

The Australian dollar has fallen markedly against other major currencies. What is economic impact on local producers and consumers?

Show all three channels by which changes in interest rates affect economic activity. Under what conditions might expansionary monetary policy, that is, lower interest rates might not greatly affect domestic economic activity? (4 marks)

Consider an economy initially at equilibrium level at near full employment. Using an aggregate demand and aggregate supply diagram or model of the economy, graphically illustrate and discuss the short-run and long-run effects of the following events upon the economy:

(a) The Central Bank within the economy lifts interest rates.
(b) There is an increase in private domestic investment spending.
(c) An increase in international oil prices.
(d) A fall in real estate prices in the capital cities of the country (hint: think of the effect upon one’s wealth level) (4 marks)

choose two countries that interest you one rich and one poor. what is the income per person in each country? find some data on country characteristics that might help explain the difference in income investment rates, population growth rates , educational attainment ,and so how might you figure out which of these factors is most responsible for the observed income difference?