Macroeconomics Answers

Marginal propensity to save =0.2, Tax rate=0.2, Autonomous saving=-50, investment spending=100, Government expenditure=150, Exports=200, Autonomous imports=30 and Marginal propensity to import=1.15
a. Derive the consumption equation from the information given.
b. Calculate the equilibrium level of income using the AD=AS approach
c. Calculate the equilibrium level of income using the injections=withdrawals(J=W)approach
d. Calculate the fiscal surplus (or deficit) at the equilibrium level of income.
e. Calculate the value of net exports at the equilibrium level of income.
f. What would the level of income have to be if net exports are zero.
g. What is the value of the multiplier in an economy.

1.Assume an economy with deteriorating employment and incomes, collapsing home prices, and business retrenchment. Is this enough information to officially declare a recession? What informal assessment of the economy would you make?

2.How might the official employment statistics of the STATIN be a misleading picture of the overall health of the economy?

3.Identify the following individuals as either "better off", "worse off" or "no different" from unanticipated inflation.
a)Creditors who make variable interest rate mortgages that are tied to the Consumer Price Index
b)Creditors who make fixed interest rate loans
c)Homeowners who pay fixed interest rate mortgages
d)Landlords who receive rent in multi-year contracts

marginal propensity to save (MPS)=0.2 , Tax rate (t)=0.2 ,Autonomous savings=-50,Investment spending(I)=100, Government expenditure(G)=150, Exports(X)=200, Autonomous imports =30, Marginal propensity to import(m)=0.15
a)derive the consumption equation from the information given.
b)calculate the equilibrium level of income using the AD=AS approach.
c)calculate the level equilibrium level of income using the injections=withdrawals approach.
d)calculate the fiscal surplus(or deficit)at the equilibrium level of income.
e)calculate the value of net exports at the equilibrium level of income.
f)what would the level of income have to be if net exports are zero?
g)what is the value of the multiplier in an economy:
i)consisting only of households and businesses(no government or foreign sectors).
ii)consisting of households, businesses and the government(but no foreign sector)
iii)consisting of households, businesses and the government and foreign sectors?

questions:
1. what is the term recession refers to?
2. what is the most volatile component of aggregate demand?
3. Assume that the Marginal propensity to consume(MPC) is 0.75, and the investment spending rises by $25 billion. By how much will the real GDP change?
4. What is the equation for the velocity f money?
5. if Namibians suddenly decide to hold more cash for carrying on transactions and for precautionary reasons, what is more likely to happen?
6. Supply-side fiscal policy is generally enacted through what?
7. The Phillips curve describes the relationship between what and what?
8. Phillips curve is an illustration of what?
9. In the crude equation of exchange where MV=PY, what is likely to happen?
10. A bill of exchange is a money market financial security that is traded where?
11. What is the most important conclusions from the keynesian liquidity preference theory?
12. Where changes in the growth of money supply in an economy can originate from?

Illustrate the labour market in full-employment equilibrium. Using the aggregate production function illustrate the corresponding level the potential level of real GDP or output (y)

1. Suppose you scored a top position in CAPE and you win a scholarship of $100,000 by one of the commercial banks. You deposit the same in the National Commercial Bank. The present required reserve ratio is 13.64%.
a.Explain how the banking system creates money based on deposits?
b.How much money can potentially be created with your deposit of $100,000 under the present required reserve ratio?

2. August is considered as the back-to-school month when parents of school going children spend a lot of money on books and other necessities for their children. Suppose a family withdraws $100,000 from Scotia Bank and spends on their children’s necessities. (The present required reserve ratio is 13.64%)
a.Using the bank’s balance sheet, show the impact on this bank’s assets and liabilities.
b.What is the impact on the bank’s loans?

3.If the banks decide to hold a lower liquidity ratio, what effect will this have on the banks multiplier?

outline the differences in arguments of the Monetarists and the Keynesians in the following areas:
a) Money holding
b) Effect of money supply growth

How is the Consumer Price Index (CPI) used in the calculation of the real interest rate?

consider c=200+0.8(Y-T)
what is the national income model ?
what is the equilibrium level of national income