Macroeconomics Answers

What effects would each of the following have on aggregate demand or aggregate supply?
a)The Central Bank within the economy lifts interest rates.
(b)There is an increase in private domestic investment spending.
(c)An increase in international oil prices.
(d)An appreciation in the foreign exchange rate value of the economy’s currency.
(e)A fall in real estate prices in the capital cities of the country (hint: think of the effect upon one’s wealth level)
(f)The country main exports fall in price while the goods the country imports from abroad rise in price

Why might it be difficult to establish the extent to which a given rate of inflation is demand pull or cost push?

What are the macroeconomic dangers facing Australia?

Distinguish between demand pull and cost push inflation. Why might it be difficult to establish the extent to which a given rate of inflation is demand pull or cost push

Using AD/AS, describe the short-run and long-run effects of :
(a)The Central Bank within the economy lifts interest rates.
(b)There is an increase in private domestic investment spending.

Using the simple Keynesian model to assess the implications for equilibrium GDP and the level of savings of an increase in the savings function. What would happen to equilibrium income if there is a sustained rise in private investment spending?

The central bank decided to implement an expansionary policy action. What would you expect to happen to the nominal interest rate, the real interest rate and the money supply? Under what economic circumstances would this type of policy action be most likely appropriate for the country

The Fed sells $10,000,000 in bonds to Jim, a bond dealer who pays for the bonds with a check drawn on his bank. Assume a 10% required reserve ratio. Which of the following statements correctly records this transaction at Jim's bank with respect to the bank's reserves?










The bank's reserves will go up by $1,000,000.









The bank's reserves will go down by $10,000,000.









The bank's reserves will go up by $10,000,000.









The bank's reserves will go down by $100,000,000.

Assuming that the money market is initially in equilibrium, trace through the effects of a rise in the money supply on the money market on the interest rate and also on output, employment and the price level.