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4. Given the consumption C = 20 + 0.4Yd, and
T = 600 I = 500, G = 600, then;
i. Write the equation of aggregate income and simplify.
ii. Calculate marginal propensity to save and interpret the result.
iii. Find autonomous tax multiplier.
iv. Calculate the change of income when G decrease by 100.
v. Calculate the new equilibrium income when tax equation is given as T = 0.25Y
vi. Calculate the new equilibrium income when I increase to 600.
The price elasticity of demand is -0.9.
The income elasticity of demand is 0.5.
The cross-price elasticity of demand between your good and a related good
is 2.0.
What can you determine about consumer demand for your product from this
information?
5. If firm’s objective is to maximize total revenue at which point of the demand
curve will it produce and why?
5. If firm’s objective is to maximize total revenue at which point of the demand
curve will it produce and why?
You need P5,000 per year for four years to go to college, your father invested P6,000 in 7% account for your education when you were born. If you withdraw at the end of your 17th, 18th, 19th and 20th birthday, how much will be left in your account at the end of your 21st birthday.
Suppose the price elasticity of demand for heating oil is 0.2 in short run and 0.7 in the long run
a) if the price of heating oil rises from $1.80 to$2.20 per gallon, what happens to the quantity of heating oil demanded in short run? In the long run?
b) Why might this elasticity depend on the time horizon?
Suppose that the residents of Windhoek spend all of their income on cauliflower, broccoli and carrots. In 2019 they buy 100 heads of cauliflower for N$2000, 50 bunches of broccoli for N$750 and 500 carrots for N$500. In 2020 they buy 75 heads of Cauliflower for N$2250, 80 bunches of broccoli for N$1200 and 500 carrots for N$1000. Suppose that the base year is 2019.
(a)What is the CPI in both years?(8)
(b) What is the inflation rate?( 4)
(c) Find nominal and real GDP for 2019 and 2020(6)
(d) Find nominal growth rateand real growth rate between 2019 and 2020.(4)
(e ) Which do you think has a greater effect on the CPI: a 10 percent increase in the price of chicken or a 10 percent increase in the price of cars? Why?(3)
(a) Explain how Life-Cycle Hypothesis and the Permanent Income Hypothesis, explain the difference between long run APC and short run APC.(8)
(b) With a help of a diagram discuss how the permanent income theory of consumption explains the difference between the cross-section and time-series estimates of the Keynesian aggregate consumption function.(12)
An open economy is described by the following system of macroeconomic equations, in which all macroeconomic aggregate are measured in billions of Namibian dollars, N$: Y = 𝐶 + 𝐼 + 𝐺 + 𝑋 − 𝑀
C = 100 + 0.75𝑌𝑑
T = 50 + 0.5𝑌
I = 200
X = 200
𝑀 = 50 + 0.25𝑌
𝐺 = 150
Where:Y is domestic income
Y is private disposable income
C is aggregate consumption
T is government tax revenue
I is investment spending
X represents exports
M represents imports of goods and service
(a) Determine the equilibrium level of income/output.(4)
(b)Illustrate aggregate spending and equilibrium level of income on a diagram(4)
(c) Determine the surplus/deficit in the government budget at equilibrium.(4)
(d) Determine trade balance at equilibrium.(4)
(e) Determine the value of the economy’s multiplier, which is applicable to government spending, and interpret it.(5)
The demand curve for a good is Q = 60 – p and the supply curve is Q = p. The government imposes a specific tax of t = 2 per unit of output.
a) Find the market equilibrium output (Q) and price (p) before tax? (4)
b) Find the new market equilibrium output (Q) and price (p) after tax (5).
c) Explain the effect the tax has on consumer surplus and producer surplus. (6)
