Macroeconomics Answers

Potatoes cost Janice 1.00 USD per pound, and she has 6.00 USD that she could possibly spend on potatoes or other items. If she feels that the first pound of potatoes is worth 1.50 USD, the second pound is worth 1.14 USD, the third pound is worth 1.05 USD, and all subsequent pounds are worth 0.30 USD, how many pounds of potatoes will she purchase? What if she only had 3.00 USD to spend?

Explain in your own words the necessity of using final good/services when calculating gross domestic product.

Given the demand function Pd=25- 2Q and the supply function Ps= 2Q+1.Asssuming
pure competition, find the consumers’ surplus, producers’ surplus and interpret the total
of consumers’ surplus and producers’ surplus

Imports lead to flow of currency out of the country. What does it mean?

Visualize a trade between India and US. Assume first that US exports a certain item to India for 1000$. Say the cost of production is 800$. That equals a profit of 200$=12,000Rs. India pays for this item with 1000$=60,000Rs. So at the end of the trade, US has 60,000Rs in foreign currency. Now is the amount of Indian wealth flowing out of the country 12,000Rs or 60,000Rs? The latter seems illogical to me.

Now assume India exporting to US a certain different item for 1000$. But say the cost of production was 900$=54,000Rs. Now the profit realized by India is 100$=6000Rs. So US just takes out the 60,000Rs from its foreign reserve and pays India.

At the end of the trade it looks like India has managed to buy back the 60,000Rs lost in imports with its export. Which means zero trade deficit. But it's obvious that a loss of 6,000Rs has occured.

So doesn't the pricing of export lead to currency outflow more than the import itself?

Using the information below determine what government spending should be to obtain full employment.

-Full employment output = $90 million
-Exports = $10 million
-The marginal propensity to import = 0.15
-autonomous imports = $10 million
-The tax rate = 0.3
-Investment spending = $21 million
-Autonomous consumption = $17 million
-The marginal propensity to consume = 0.5