Economics Answers

3) The following relations are given for an economy:
Autonomous Consumption 460
Marginal Propensity to Save 0.3
Autonomous Investment 18
Induced Investment Coefficient 0.1
Government Expenditure (Exogenous) 162
Transfer Income (Exogenous) 48
Exports (Exogenous) 25
Marginal Propensity to Import 0.05
a) Calculate the equilibrium level of Income, consumption, investment and import in the
above economy.

(a) Explain the COVID 19 effect on aggregate supply. As a result of this change in aggregate supply, what is expected to happen to national income? Illustrate your answer on an appropriate diagram. (11 marks)
(b) Discuss appropriate monetary and fiscal policy which the government can use to remedy this situation. Also discuss the limitations of the proposed policies. (11marks)

Q. Ardashir (A), Bashir (B) and Diana (D) have utility functions defined over chocolates (‘c’), a private good, and music (‘M’), a public good. Their utility functions are defined by ui = ci.M , i= A,B and D. Chocolates (c) cost Re.1 each and music (M) costs Rs.10 an hour. The wealth (in Rs.) of agents A,B and D is Rs.30,Rs.50 and Rs.20 respectively.
(i)Set out the Lagrangian to calculate the Pareto optimal quantity of music consumed. (3)
(ii)Confirm your calculations by writing out the Samuelson-Lindahl condition for the Pareto optimal consumption of music .Would the Pareto optimal consumption of music change if each

What is the effect of Monetary Policy under Fixed Exchange Rate and Flexible Exchange Rate regime? Explain
it using IS-LM analysis.

Who have higher price elasticity , gasoline or lamburghini cars?

As a policy advisor, explain how you would use the OMO to secure 2-3% economic growth and reduce unemployment in an economy in slight recession?

Imagine that the banking system received additional desposits of $100 million and that all the individual banks wish to retain their current liquidity ratio of 20%

You are given the following market demand and supply functions for an
important medicine to fight covid-19, a deadly & viral disease.
Market Demand: P=160 - Q
Market Supply: P= 40+4Q
(i) Draw the demand and supply diagram and calculate the price-quantity pair
that enables business transaction to take place between the class of buyers and
sellers. [4
marks]

In his leisure time, Abed loves to watch television, and luckily for him, we live in the golden age of television with a functionally endless supply of surprisingly good television. Abed also eats snacks, because he gets hungry, but that’s just about all that Abed does.

We could describe Abed’s preferences using a utility function over snacks (s) and leisure (l) as

In the AD-AS model, an expansionary fiscal policy may lead to a...
1.rightward shift of aggregate demand and demand-pull inflation.
2.leftward shift of aggregate demand and demand-pull inflation.
3.rightward shift of aggregate supply and cost-push inflation.
4. leftward shift of aggregate supply and cost-push inflation.