Macroeconomics Answers

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

Which of the following are examples of the limitations of GDP? That is, which of these are not accounted for by the computations of GDP?
A) Highway Repairs done by the government
B) The value of leisure time
C) The import and sale of illegal drugs from South America
D) The value of housing services provided by owner-occupied homes

Suppose, in an economy, there are only two firms, a potato producer and a catsup producer
and all tomatoes are used as immediate goods to produce catsup.The income
statement are shown below:
(Figure in billion $)
Tomato Producer ------ Amount($) Catsup Producer ----- Amount($)
Sales of tomato 200 Sales of tomato 500
Wages 100 Wages 150
Interest 20 Interest 30
Rent 25 Rent 40
Depreciation 10 Depreciation 10
Indirect business taxes 5 Indirect business taxes 10
Tomatoes 200
a.What is the profit for firm?
b.What is the value of GNP and NNP of that economy?
c.What is the value added in each firm?
d. What is the value of national income in that economy?

What is MPC? "There is a trade-off between MPC and MPS"-prove the statement.

a.Explain Keynesian theory of consumption with its important features.
b.Suppose,the saving of an economy is given by S=-10+0.2Y and autonomous investment I=$500million.
Find:
1.the equilibrium level of income;
2.the level of consumption;
3.the new levels of income and consumption if investment increases permanently by $500 million.

What is consumption function?Suppose the consumption function of a society is as follows: C=100+0.85Y, where C=Total consumption expenditure and Y=Disposable income.
Answer the following questions:
a.What is the autonomous consumption?
b.What is the total consumption when disposable income is 5000?
c.What is induced consumption when disposable income is 8000?
d.Find MPS .Prove that MPC+MPS=1

a.Define marginal efficiency of capital.How does it determine the volume of investment?
b.Given the saving function S=-1.0 +0.2Y and autonomous investment I=$500 million .
1.Find the level of consumption .
2.If investment decreases permanently by $50 million.What is the new level of consumption?

Distinguish between GDP and GNP. When can GNP be greater than GDP in an economy?

Mention the determinants of investment. Suppose,on July1,2008,the total stock of inventory of an economy was 5 billion dollars and the stock of inventory had become 10 million dollars at the end of June,2009. What was the inventory investment in that economy in FY 2008-2009?

Explain the relationship between saving and investment. How investment demand curve is derived? What may happen to the position of the investment demand curve if the political situation of the country worsens?