Macroeconomics Answers

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 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), saving equals investment.

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

If desired aggregate expenditures are less than actual output, aggregate output will decrease.
Explain in detail: True False or Uncertain

Suppose a company produces $5M worth of output and has sales of $2M each to domestic and foreign customers. It imports $1 M worth of raw material, pays its workers $3M in wages, pays its creditors $2M in interest, and has minus $1M in profits for its owners. This company’s operations add $4M to GDP whether measured by the value added approach, the expenditure approach, or the income approach.
Explain in detail: True False or Uncertain

Suppose a government collects $10B in income taxes, pays a firm $2B to build a bridge, pays its own workers $1B, transfers $4B to poor citizens and pays $3B in interest payments to government bondholders. This government’s operations add $10B to the measurement of GDP.
Explain in detail: True False or Uncertain

If you sell a used book to your friend, it does not affect GDP since this transaction is part of “underground economy”.
Explain in detail: True False or Uncertain

Currency fluctuations of emerging economies are not prone to the behaviour of hard currencies. Explain.

Lucas’ point of view, what are the limitations of the Keynesian model? What improvements does he suggest?

Lucas’ point of view, what are the limitations of the Keynesian model? What improvements does he suggest?