Economics Answers

a. Work through the problem below and show working for all variables (1-10) in addition to
totals of columns and rows in the matrix. (10 marks)
C = 300 + 0.8YD (Private consumption)
YD = Y + TR – T (Private Disposable income)
T = 80 + 0.1Y (Total taxes)
G = 300, TR = 100 (Gov. expenditure and transfer payments respectively)
I = 450 (Private investment)
X = 200 (Total exports)
IM = 120 + 0.2Y (Total imports)
Y = C + I + G + X – M (Goods Market Equilibrium condition)
Policy variables: Fiscal policy (G, t and TR), Monetary Policy: (N/A)

The Case:
Pakistan cement industry has shown very fast progress in last few years and has
become a leading sector of the economy. At the time of inception, there were only
four cement plants in Pakistan which has now grown to over 30 units. Cement
manufacturers have also expanded their production capacity to meet higher demand
because of construction projects and CPEC. Maple Leaf Cement Factory Limited is
a reputable largest manufacturer of cement in Pakistan. The company was set up in
1956. Suppose the quantity demanded and quantity supplied functions of cement
industry in starting week of current month are:
Qd = 5000-6P
Qs= 1500+P

Requirements:
a. Calculate the market equilibrium level of price and quantity.
b. Calculate price elasticity of demand using point elasticity method when the
company is in equilibrium and interpret the result.
c. What will happen to supply of cement, equilibrium price and equilibrium
quantity of cement if government gives subsidy to cement manufacturers?

Calculate the market equilibrium level of price and quantity
Qd = 5000-6P
Qs= 1500+P

Part A.Refer to the National Income Accounting Matrix Table(in Moodle)and use it to fill in the values of the variables in the matrixcalculatedfrom the Keynesian algebraic model given below. a.Work throughthe problem belowand show working for all variables(1-10) in addition to totals of columns and rows in the matrix.(10 marks)C = 300 + 0.8YD (Private consumption)YD = Y + TR –T (Private Disposable income)T = 80 + 0.1Y (Total taxes)G = 300, TR = 100 (Gov. expenditure and transfer payments respectively)I = 450 (Private investment)X = 200 (Total exports)IM = 120 + 0.2Y (Total imports)Y = C + I + G + X –M (Goods Market Equilibrium condition)Policy variables: Fiscal policy (G, t and TR), Monetary Policy: (N/A)

Refer to the National Income Accounting Matrix Table(in Moodle)and use it to fill in the values of the variables in the matrixcalculatedfrom the Keynesian algebraic model given below. a.Work throughthe problem belowand show working for all variables(1-10) in addition to totals of columns and rows in the matrix.(10 marks)C = 300 + 0.8YD (Private consumption)YD = Y + TR –T (Private Disposable income)T = 80 + 0.1Y (Total taxes)G = 300, TR = 100 (Gov. expenditure and transfer payments respectively)I = 450 (Private investment)X = 200 (Total exports)IM = 120 + 0.2Y (Total imports)Y = C + I + G + X –M (Goods Market Equilibrium condition)Policy variables: Fiscal policy (G, t and TR), Monetary Policy: (N/A)

Assuming a system of floating exchange rates between Japan and Australia, indicate whether each of the following would cause theJapaneseyen and the AUD to appreciate or depreciate.a.Australia unilaterally reduces tariffs on Japanese products.b.Japan encounters severe inflation.c.Deteriorating political relations reduce Japanese tourism in Australia.d.The Australian government invites Japanese firms to invest in oil fields in Australia.e.The rate of productivity growth in Australia diminishes sharply.

Supposeyou are recommending monetary policy. The economy is experiencing a sharp and prolonged inflationary trend.a.What change in open market operations would you recommend? (1 mark) b.Explain how the change you advocate would affect the cash rate.(2 marks)c.Explain how the change you advocate would affect the cost and availability of credit.(2 marks)d.Use diagrams/graphs of the money market and also AD-AS to support your discussion

A consumer splits their income equally between two goods. If the price of one good increase by 10% and their income increases by 5%, show that the consumer’s optimal consumption bundle will change.

Please answer a particular question with the help of graph

The rate of interest is a price:a. Of what is it the price? (1 mark)b. What determines this price? (Sketch a relevant graph of the money market).(2 marks)c.What factors influence the demand for money? (2 marks)d. What factors influence the supply ofmoney?(2 marks)e. If the money market is in short-run equilibrium, explain the adjustments that will take place for: i)an increase the in money supply(2 marks)ii)increase in the demand for money

Use the following news clip to work on the following questions:Debt Reduction at Centre of State Election CampaignQueensland business leaders are demanding that the election campaign focuses on reducing a growing debt level and putting the state’s finances back on track. The state’s financial position has been under fire because of a debt blowout caused by the domestic and international market volatility and the natural disasters last year.Source: The Australian, 26 January 2012
4a.If reducing debt means spending cuts, will aggregate expenditure fall by more than, less than or exactly the same as the spending cuts? Explain.(2 marks)b.Explain and draw a graph to illustrate the effects of the events described in the news clip on aggregate expenditure and aggregate demand in both the short run and the long run