Macroeconomics Answers

HOW DOES ECONOMIC CONSUMER REACT TO CHANGES IN BOTH PRICE & INCOME OF A NORMAL & SUPERIOR GOODS IN THE LIKES OF SUBSTITUTABILITY OF BOTH EXPORTED & IMPORTED GOODS USING GAME THEORY

A farmer grows a bushel of wheat and sells it to a miller for $1,the miller turns the wheat into floar and sells it to a baker for 3$.
The baker uses the floar to make a floar and sells it to consumer for 6$.
FIND
1.Value added in each stage of production?
2.GDP?
NOTE; The value of the finished goods already includes the value of the intermediate goods.So, including intermediate goods in GDP would be 'double counting'

1. Differentiate between rational expectation and adaptive expectations?
2. What is the central tenet of the policy ineffectiveness hypothesis of the new classical proposition?
3. How changes in wealth shifts the consumption function?

What backs up the value of U.S. dollars?
A- Gold
B-Foreign currency reserves held by the Federal ReserveSystem
C-Gold denominated Federal Reserve Syestem assets
D-Faith that the dollars represent command over goods and services

Because of economics of scale, it is sometimes more cost effective for a firm to operate a large plant at less than maximum efficiency than a small plant at maximum efficiency”. Do you agree with this statement? Explain

“Managerial economics involves use of economic analysis to make business decisions involving the best use of a firm’s scarce resources” Explain the statement with suitable example.

c. What other variables might be important in helping estimate the demand for this travel product?

(a) Given that money supply is KSh 1400 millions, autonomous consumption is KSh120 million, while the responsiveness of consumption to changes in disposable income is estimated to be 80% by the ministry of planning. Aggregate autonomous investment is ksh 200 million investment while one % increase in interest rate changes investment by KSh10 millions. The government collected KSh 200 million as tax revenue and wishes to increase expenditure by 10% above the revenue collected. The transactionary and precautionary demand for money function is expressed as mt/p=0.1y while the speculative money demand ms/p is -100r .
(i)Solve for equilibrium real output and equilibrium interest rate

given that in 1990, nominal GDP = 2063 and real GDP(base 1990) = 2063. in 1991, nominal GDP = 2113 and real GDP = 2088. for both years calculate:
a. nominal GDP growth
b. real GDP growth
c. GDP deflator
d. rate of inflation