Economics Answers

There are various main objectives in the macroeconomics policy, each of which contributes to an explanation and understanding of macroeconomics. Briefly define the following macroeconomic objectives and explain in your own words how each can be applied to improve the economy:

1. Economic growth and increasing employment (5)
2. Stability of output and employment levels (5)
3. Stable and low inflation (5)
4. Distributional and equity objectives and the reduction of inequality (5)
5. Economic development and poverty reduction (5)

Out of 25

The price elasticity of demand for urban transitfares has been estimated to lie between

-0.1 and -0.6. Based on these results, what isthe economic argument forraising transit

fares? What political arguments might local governments and transit authorities

encounterin opposition to these economic arguments?

Explain how the South African Reserve Bank can use the open-market policy to stimulate the economy

Changes in GDP are reflected in the business cycle, as well as the rate of inflation and the overall balance of payments situation. True or false

The price elasticity for rice is estimated to be -0.4 and the income elasticity is 0.8. At a price of $0.40 per pound and a per capita income of $20,000, the demand for rice is 50 milllion tons per year

a) is rice an inferior good, a necessity or a luxury? explain.

b) if per capita income increases to $20,500, what will be the quantity demanded of rice?

a) Suppose that the central bank acts to increase the money supply.

i. In the aggregate demand/aggregate supply diagram, will this monetary policy action work

initially to shift the aggregate demand curve, the short-‐run aggregate supply curve, or the long-‐

run aggregate supply curve? (Note: focusing for now on just the short-‐run effects of the change

in policy, only one of these curves will shift.)

ii. In which direction will the curve you mentioned above shift: to the left or to the right?

iii. When the curve you mentioned above shifts, what will the short-‐run effect on the

economywide level of prices be: with it rise, fall, or stay the same?

iv. When the curve you mentioned above shifts, what will the short-‐run effect on real GDP be:

will it rise, fall, or stay the same?

v. When the curve you mentioned above shifts, what will the short-‐run effect on unemployment

be: will it rise, fall, or stay the same?

Analyse the following transactions for Surprise Ltd. using the concept of Accounting Equation comprising of Assets, Liabilities and Equity 1.Commenced business with cash of ₹ 5,00,000.

2. Purchased equipment for cash ₹ 2,00,000. 3. Purchased furniture worth ₹50,000 on credit from IndiMart. 4. Purchased raw materials for ₹25,000 against cash from XYZ Suppliers. 5. Deposited cash of ₹ 1,25,000 in the current account. 6. Sold goods for ₹75,000 and received a cheque against the same.

2.1 Consider a closed economy that is described by the following model:

C = 280m + 0.72Y

Where:

C = Consumption Y = Income

I = 150m I = Investment

G = 300m G = Government spending

T = 22% t = Tax rate.

2.1.1 Calculate the multiplier. (3)

2.1.2 Calculate the total autonomous spending. (2)

It is the practice of almost all banks in the Philippines that when they grant a loan, the interest for one year is automatically deducted from the principal amount upon release of money to a borrower. Let us therefore assume that you applied for a loan with a bank and the P80,000 was approved at an interest rate of 14% of which P11,200 was deducted and you were given a check of P68,800. Since you have to pay the amount of P80,000 one year after, what then will be the effective interest rate?

•Given the following set of simultaneous equations for two related goods,xandy, find the equilibrium conditions for each market if the consumers’ income isi=600. What types of goods arexandy?

•Q_dx= 22-3P_x+P_y+ 0.1i

• Q_sx=-5+15P_x

•

•Q_dy=32+2P_x-4P_y+0.1i

•Q_sy=-6+32P_y