Macroeconomics Answers

If the perfectly competitive firm is producing an output level at which price equals marginal cost. Isis
(a) earning profits
(b) taking losses
(c) earning normal profit
(d) there is not enough information to answer this question.

& I think it is earning zero economic profit but that is not an option here.

Question 1

What component of GDP (C, I, G, X, M) if any, would each of the following transactions affect? Explain your answer clearly.

a) Toyota issues new shares of stock to finance the construction of a car plant.
(5 marks)
b) You buy a new Toyota Camry. (5 marks)
c) The government pays out government servants’ salary. (5 marks)
d) You spend the entire weekend cleaning your house. (5 marks)

Evaluate and explain as accurately as you can the manner in which each of the following individual would be affected by fairly rapid inflation?

a) A department store assistant (5 marks)
b) A pensioner who receives fixed monthly income. (5 marks)
c) The owner of an independent coffee shop

In the late 1990s a growing number of economists argued that world policymakers were focusing too much on fighting inflation. The economists also argued that the technical level of potential output had risen. Show their argument using the AS/AD model.

Question 1

What component of GDP (C, I, G, X, M) if any, would each of the following transactions affect? Explain your answer clearly.

a) Toyota issues new shares of stock to finance the construction of a car plant.
b) You buy a new Toyota Camry.
c) The government pays out government servants’ salary.
d) You spend the entire weekend cleaning your house.


Question 2

Unemployment can be avoided as long as businesses are willing to accept lower product prices, and workers to accept lower wage rates. Critically evaluate this statement.



Question 3

Use the data contained in Table 1 on the economy of Westeralia to determine the following national income accounting aggregates:

Table 1:
Items Dollar million
Exports 88.15
Subsidies 160.50
Government spending 126.45
Private final consumption spending 324.45
Gross private investment 106.50
Statistical discrepancy 7.05
Imports 99.15

a) Net export.
b) Gross domestic product using the expenditure method.
c) With respect to national income accounting, explain what is meant by the “statistical discrepancy” and why it is necessary?


Question 4

Evaluate and explain as accurately as you can the manner in which each of the following individual would be affected by fairly rapid inflation?

a) A department store assistant
b) A pensioner who receives fixed monthly income.
c) The owner of an independent coffee shop

If personal taxes are increased by $10 billion, we can expect that consumers will reduce
a. spending by $10 billion.
b. spending by more than $10 billion.
c. spending by less than $10 billion.
d. saving by $10 billion.
e. saving by more than $10 billion.

If a Big Mac is 2 dollars in the United States and 4.5 pounds in Great Britain what is the exchange rate (pounds to dollars) according to PPP?

If the quantity of final goods and services produced within a country decreased could real GDP increase/decrease?
Could nominal GDP increase/decrease and if so how?

Calculate NNP at market price and private income from the following;

Net current transfers to abroad& & & & & 30
Mixed income& & & & & & & & & & & & & & & & & & & & & & & & & & & & & 600
Subsidies& & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & 20
Operating surplus& & & & & & & & & & & & & & & & & & & & & & & & & & 200
National debt interest& & & & & & & & & & & & & & & & & & & & 70
Net factor income to abroad& & & & & & & & & & 10
Compensation of employees& & & & & & & & & & 1400
Indirect tax& & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & 100
Domestic product accruing to govt& 350
Current transfers by govt& & & & & & & & & & & & & & & & 50