Economics Answers

Consider the following model of national income determination
C = 300 + 0.75 (Y-T)
T = 100
I = 475
G = 150

i) List the entire exogenous and endogenous variable. (2 marks)

ii) Solve for the equilibrium value for all the endogenous variables. (2 marks)

iii) Suppose government expenditure increase by 50 find the new equilibrium values of the endogenous variables. Assume the economy of Kenya is described by the following information
Y = C + I + G (x - M) x = 20
C=20+0.8Yd M = 4 + 0.3Y
T = 30 Yd=Y-T
G = 22 I = 30 (8 marks)

(a) Assume the following information represents the National Income Model of an ‘Utopian’ economy.

Y = C + I + G
C = a + b(Y – T)
T = d + tY
I = IO
G = GO

Where a > O; O < b < 1
d > O; O < t < 1

T = Taxes
I = Investment
G = Government Expenditure

i) Explain the economic interpretation of the parameters a,b,d and t. (4 marks)
ii)Find the equilibrium values of income, consumption and taxes. (8 marks)
b) Discuss the three approaches used in measuring the national income of a country and show why they give the same estimate. (8 marks)

In 2005, 1000 kilograms of potatoes were sold for $4/kilogram. Also, 50 barrels of oil were sold for $55 per barrel. In 2015, 1100 kilograms of potatoes were sold for $6/kilogram. Also, 65 barrels of oil were sold for $60 per barrel.
What is the real GDP for 2005 if 2015 is the base year? Show your calculations.

relevant example because many state governments have been forced to cut the provision of medical care due to increased expenditures on prisons.) Alternative Medical Care Prisons 160 120 80 40 20 40 60 80 Graph the production possibilities curve. Then discuss the following: hat is the opportunity cost of the first 20 units of medical care? Of the last 20 units (from 60 to 80) of medical care? a. W b. Add point F (40 units of medical care, 60 units of prisons). What does it represent?

Year Money GDP* Deflator Real GDP**
2013 $ ________ 105 $760 000
2014 $820 000 106 $________
2015 $855 000 ________ $800 000

What is the growth rate of nominal output from 2013 to 2014?

Assume the price elasticity of demand for eggs in India is -0.75. Everything else equal, by what % would the price of eggs have to change to INCREASE egg consumption by 15%?

In an open economy with fixed exchange rate, the government does not have autonomy in monetary policy. Do you agree with this statement? Justify your answer.

Bring out the salient features of Ramsey model for decentralized households (your answer should include the assumptions, important equations, phase diagram and its interpretation). In what respect is it different from the Solow model?

Derive the indirect utility function form the given direct utility function . , dddddP 0 d,. Use Roy’s identity to construct demand functions for the two goods dP and d,. Are these same as demand functions derived from the direct utility function?

Assume a hypothetical consumer good X and good Y. the price of good X is 1 and price of good Y is 3 and the consumer budget is birr 10 for the two goods. where: Qx is quantity of good X, Qy is quantity of good Y and TUx and TUy is total Utility from consuming good X and Good Y respectively.
Based on the given information, answer the following questions.
a. Compute the marginal utility of the two goods
b. At what amounts of consumption does diminishing marginal utility starts to occur for the two goods?