Economics Answers

Real GDP decrease during?

Assuming that a household in Happy-land consumes only apple juice and T-shirts. Last year, which was the base year, the household spent $440 on juice and $132 on T-shirts. In the base year, the juice was $2.2 a bottle and T-shirts were $11. This year, the juice is $3.3 a bottle, T-shirts are $13.2 each, and a typical household has bought 198 bottles of juice and 15 T-shirts. Is the inflation rate that you've calculated likely to be biased? Why or why not?

The television market in South Africa has two major suppliers producing differentiated television models. The monthly demand functions of the two suppliers is as follows:

Samsung q1= 450 - 2p1 + p2
LG q2 = 450 - 2p2 + p1

The marginal costs of production are R60 per unit and fixed costs are equal to zero

Part 1
a) write down an expression for Samsungs inverse demand function which expresses p1 on terms of q1 and q2 only

b) in a similar manner, write down the expression of LGs inverse demand function in the form of an equation for p2 in terms of q1 and q2 only

22. If the Central Bank reduces the bank rate, this will cause …… (a) commercial banks to reduce lending (b) commercial banks to merge (c) money supply to increase (d) money supply to reduce
23. A change in the real value of wealth that causes spending to change when the level of prices changes is known as: (a) interest rate effect (b) International-Substitution effect (c) Consumption effect (d) Real Balance effect
24. If the economy is in an inflationary period, what action would Fiscal authority most likely take? (a) Decrease taxes (b) Decrease the discount rate (c) Increase government spending (d) Increase taxes
25. ....... is a process where Central Bank classifies borrowing into preferred and less preferred sectors of the economy (a) Selective ratio (b) Credit ceiling (c) Selective ratio (d) None

Government may prevent possible abuse of market power by these firms within the
industry. How would the government achieve this?

A decrease in the interest rate raises *
the law of money
the law of demand
the quantity demanded of money
the demand for money