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Macroeconomics
Explain what happens to the AD curve if personal income taxes decline?
Macroeconomics
Task
a profit maximizing firm faces the following constrained maximization problem:p(x,y)=80x-2x^2-xy-3y^2+100y
subject to: x+y=12
Determine profit maximizing output level of commodities x and y subject to the conditions that output equals 12
Detailed explanation: YES
a profit maximizing firm faces the following constrained maximization problem:p(x,y)=80x-2x^2-xy-3y^2+100y
subject to: x+y=12
Determine profit maximizing output level of commodities x and y subject to the conditions that output equals 12
Detailed explanation: YES
Macroeconomics
compute the equilibrium income
Macroeconomics
) Consider the following IS/LM model for a closed economy
C=400+0.4yd ,I=200+0.3y-2000i, G=360,T=400 ,m/p=4y-100000ims=2600 (10 marks)
i. Derive the IS equation
ii. Derive the LM equation
iii. Solve for equilibrium real output
iv. Solve for the equilibrium interest rate
v. Solve for equilibrium value of consumption and investment
C=400+0.4yd ,I=200+0.3y-2000i, G=360,T=400 ,m/p=4y-100000ims=2600 (10 marks)
i. Derive the IS equation
ii. Derive the LM equation
iii. Solve for equilibrium real output
iv. Solve for the equilibrium interest rate
v. Solve for equilibrium value of consumption and investment
Macroeconomics
The government plans to raise state spending by $2bn in the next fiscal year. Economists estimate that consumers will spend, on average, 80 per cent of any increase in income they receive after tax and that the marginal propensity to import is 0.25. The government’s marginal tax rate is 30%. The government argues that this increase in spending will be sufficient to remove a deflationary gap in the economy, estimated as equivalent to a deficiency of aggregate expenditure of $4bn.
a. Calculate the change in national income that can be expected from the $2bn of extra government spending.
b. Comment on the government’s forecast that the $2bn in extra state spending is sufficient to remove the deflationary gap and restore full employment.
a. Calculate the change in national income that can be expected from the $2bn of extra government spending.
b. Comment on the government’s forecast that the $2bn in extra state spending is sufficient to remove the deflationary gap and restore full employment.
Macroeconomics
Why can the Nominal GDP be higher or lower than the real GDP?
Macroeconomics
Suppose that the consumption function is: C = $500 + 0.8 × YD, where YD is disposable income.
Reference: Ref 11-5
(Scenario: Consumption Spending) The marginal propensity to save is:
A. $500.
B. 0
C. 0.8.
D. 0.2.
Reference: Ref 11-5
(Scenario: Consumption Spending) The marginal propensity to save is:
A. $500.
B. 0
C. 0.8.
D. 0.2.
Macroeconomics
For a fixed aggregate supply curve, decreases in aggregate demand increase real GDP.
True
False
True
False
Macroeconomics
An open macroeconomic model is represented parametrically as followY=Io+Go+X0-M, M=mo+m1yd,C=co+c1yd, T=tY and Yd=T-T
(i) Compute the equilibrium income
(ii) Derive any two multipliers in respect to the endogenous variables
(iii) Interpret the multipliers and explain their significance in policy context
(i) Compute the equilibrium income
(ii) Derive any two multipliers in respect to the endogenous variables
(iii) Interpret the multipliers and explain their significance in policy context
Macroeconomics
I lend you a $1,000 today and you agree to pay me $1,100 one year from today. You are going to buy a computer with the $1,000 that your borrow from me. You anticipate that if you wait a year to buy the computer, its price will rise to $1,070.
What is the nominal interest rate on this loan?
What is the expected inflation rate?
What real interest rate do the lender and borrower anticipate?
Suppose that the computer actually costs $1,020 at the end of the year. What is the actual real interest rate on the loan?
Would you have been less likely or more likely to borrow the money if they had known the true inflation rate?
Who was hurt by the fact that the actual inflation was
not equal to the expected inflation rate, the lender or the borrower?
What is the nominal interest rate on this loan?
What is the expected inflation rate?
What real interest rate do the lender and borrower anticipate?
Suppose that the computer actually costs $1,020 at the end of the year. What is the actual real interest rate on the loan?
Would you have been less likely or more likely to borrow the money if they had known the true inflation rate?
Who was hurt by the fact that the actual inflation was
not equal to the expected inflation rate, the lender or the borrower?
