Macroeconomics Answers

Explain why each of the following statements is True, False, or Uncertain according to economic principles. Use diagrams where appropriate. It is the explanation that is important.

In an aggregate expenditure model with no government or foreign sectors, represented by C = a + bY and I (an autonomous amount), saving equals investment.

Explain why the following statements is True, False, or Uncertain according to economic principles. Use diagrams where appropriate. It is the explanation that is important.
In an aggregate expenditure model with no government or foreign sectors, represented by C = a + bY and I(an autonomous amount), an increase in the marginal propensity to save causes the multiplier to rise.

Explain why the following statements is True, False, or Uncertain according to economic principles. Use diagrams where appropriate. It is the explanation that is important.
If desired aggregate expenditures are less than actual output, aggregate output will decrease.

Since Fall of 2013, the price of oil has shown a steady decline as continued increase of global oil production that has far exceeded the rising demand for oil. Accordingly, many analysts in the energy field have had predicted the likelihood of further decline in oil price in the US market as the US continues to expand its domestic oil production with a long term objective of becoming even net exporter of oil by Y2030. Given the significant trend of declining oil price and expected independence of oil production by US in coming decade, draw an AS/AD diagram of macroeconomics model (not oil market), explaining the effect on the US macro-economy of expected decline in oil price in 2014 and beyond. In your explanation in words with the help of the diagram, you must clearly explain the connection between changes in oil price and the fluctuations in macroeconomic fundamentals in the US economy. Then show the impact of continuos fall in oil price on the U.S. economy by using ad-as model during the recovery period 08

. For an economy with a tax rate of 10%, the following is given:
C = 60 + 0.8YD
G = 400
I = 140
NX = 10 - 0.20Y
(I) If the economy produces $1 of extra output, how much of it is;
(a). spent on domestic goods?
(b). import expenditure?
(c). saved?

Using diagrams for aggregate expenditures (AE) and aggregate demand and supply (AD-AS), show the short run effects each of the following scenarios has on the relevant economy. Be sure to identify the cause of any shift or movement along AE, AD, and/or SRAS. [Hint: Your diagrams for each part should look something like those in Figure 23-8, or 23-10 in your text.]
(a) Due to the decrease in world oil prices, Canadian oil and gas companies reduce investment spending. [4]
(b) Depreciation of the Euro leads to an increase in exports for the Euro-zone and a reduction in the marginal propensity to import in the Euro-zone. [5]
(c) Canadianproductivityrapidlyincreases,whileatthesametimeCanadianexportsincreaseduetoa growing US economy. [5]

The short run aggregate supply curve is upward sloping.
EXPLAIN. True, false, or uncertain.

If the price level increases, the real value of household money holdings falls. This will result in a downward shift of aggregate expenditures and a leftward shift of the aggregate demand curve.
EXPLAIN. True, false, or uncertain.

In an aggregate expenditure model with no government or foreign sectors, represented by C = a + bY and I (an autonomous amount), saving equals investment.
Explain in detail: TRUE< FALSE, or UNCERTAIN.

In an aggregate expenditure model with no government or foreign sectors, represented by C = a + bY and I (an autonomous amount), an increase in the marginal propensity to save causes the multiplier to rise.
Explain in detail: TRUE, FALSE, or UNCERTAIN.