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U.S. economic growth had slowed to a crawl, and then to a halt. Companies that had stocked up on recent college grads in the tighter labour markets of 1998-2000 found themselves with more than they knew what to do with in 2002 and 2003. They were not eager to hire more. Bonuses and other “perks” disappeared; job offers became scarcer. With the unemployment rate around 6% in May and June of 2003, the job market was far from the worst ever. But it was nothing like the glory days of 2000.
(iv) Briefly explain and justify what prevailing situation was taking place in the year 2003.
(v) Identify and explain two (2) fiscal policies and two (2) monetary policies that the government may have used to correct this situation.
is the economy experiencing a recessionary out gap of inflationary output gap?
A. Given the demand function 𝑄𝑑 = 15 − 0.2𝑃, find quantity demanded when price is GH¢ 2.00, GH¢ 5.00, GH¢ 7.00, and GH¢ 10.00. Present your results in a table.
B. Demand function for good X is given as Qdx = 6 – 0.2Px + 0.28Pz – 0.45Py
where Qdx is quantity demanded for good X, Px is price of good X, Py and Pz are
prices of related goods. Y is good Y and Z is good Z.
i. What type of good is Y? Explain your answer. ii. What type of good is Z? Explain your answer.
QUESTION THREE
With the aid of diagrams, explain the difference between increase in demand and increase in quantity demanded.
A firm is faced with undertaking one of these four projects in 2022 – open new branch, introduce another product, purchase a brand new vehicle, or increase workers’ salary. The costs and expected benefits of the projects are presented in the table below.
Activity
Branch Product Vehicle Salary
Direct cost Benefit (GH¢) (GH¢) 380 390 400 400 350 392 422 425
Use the information provided in the table to answer the following questions.
a) Compute the net benefit of each project using the direct cost.
b) Find the opportunity cost of each project.
c) Compute the net benefit of the projects using the opportunity cost.
In each of the following examples, first calculate the PED and then decide if the PED is elastic,
inelastic, perfectly elastic, perfectly inelastic or unitary elastic.
a. The price of a product falls from $8 to $6, causing demand to extend from 10,000 to
12,500.
b. Demand contracts from 500 to 400 when price rises from $40 to $42.
c. Demand extends from 2,000 to 2,800 when price falls from $20 to $18.
d. Price rises from $15 to $30 but demand stays unchanged at 5,000.
e. An increase in price from $80 to $90 and as a consequence, a decrease in quantity
demanded from 400 to 300.
Demand contracts from 500 to 400 when price rises from $40 to $42
Assume that a consumer consumes two commodities x and y and makes give combination for the two commodities? Explain its In your own words
Given the Demand function Q1 = 100-P1+0.75P2-0.25P3+0.005Y Calculate the price, income and
cross-price elasticity of demand and interpret the result respectively at P1=8, P2=15, P3=30 and
also Y=8,000 �
QUESTION TWO
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?
