Economics Answers

The utility approach to consumer demand theory is based on the assumption of cardinal utility, while the indifference curve approach is based on ordinal utility. Which approach is better? Why?

Given that:
C = 0.5Y + 50
I = -10r + 650
Ms = 3000
L1 = 0.4Y
L2 = -15r + 2750
Md = L1 + L2

Where:
L1 = Transaction and Precautionary demand for money
L2 = Speculative demand for money

Determine the equilibrium values of national income (Y) and interest rate (r) on the assumption that the commodity and money markets are in equilibrium. Show the equilibrium values of Y and r on a graph

An open macroeconomic model for a hypothetical economy is represented as follows

Y= C0 +Io+Go+X0-M, M=mo+m1yd,C=co+c1yd, T=tY and Yd=Y-T

Show that equal change in tax and government expenditure are expansionary to the economy
Derive the equilibrium level of savings in the economy above
Derive the investment multiplier

b) Using appropriate model, illustrate the effect of an expansionary fiscal policy in an open economy operating in free exchange rate regime .Assume perfect capital mobility. What is the effect if the government uses monetary policy alternatively?

c. The full effect of fiscal policy may not be realized if not matched with changes in monetary policy, explain using the IS/LM model

A consumer’s utility function is given as
U(x,y) = In (x+2y- *
+
,
)
Where x and y are two goods of consumption.
(a) Find the indirect utility function of the consumer.
(b) Examine if Roy’s law is satisfied by the consumer’s demand function for y.

IF the national income accounting equation is Y=C+I+G+E-M

Where: C=8+0.6Yd
I=25
G=10
E=70
M=15+02Y
T=7+0.3Y
R=25-0.3Y

1.1 Determine the economy's national income/output
1.2 Determine the economy's multiplier applicable to government spending and interpret its meaning
1.3 Use the multiplier applicable to exports and explain how a N$100 billion decline in the demand for exports could affect the following variables:

i) GDP
ii) Balance of trade
iii) Government budget

Suppose the technology matrix is
A= 0.2 0.3 0.2
0 4 0.1 0.2
0.1 0.3 0.2

Let the final demand sector be D = 10
5
6
Find the level of production of the three goods.

Show how you will deal the following case, giving reasons for your answer:
You receive a telephone call from the manager of a local store to the effect that Mrs. Angelina, One your customers, is purchasing goods for which she is paying by cheque.Mrs. Angelina wishes to take the goods with her.The manager wants to know if the cheque of $25000 will be banned.

The following relations describe the supply and demand for posters.

Qd = 65,000 – 10,000 P
Qs = -35,000 + 15,000P

Where Q is the quantity and P is the price of a poster, in dollars.

a. Complete the following table.

Price Qs Qd Surplus or Shortage
$6.00
5.00
4.00
3.00
2.00
1.00

b. What is the equilibrium price?

An investor currently holds the following portfolio:
Amount
Invested
8,000 shares of Stock A $16,000 Beta = 1.3
15,000 shares of Stock B $48,000 Beta = 1.8
25,000 shares of Stock C $96,000 Beta = 2.2
The investor is worried that the beta of his portfolio is too high, so he wants to sell
some Stock C and add Stock D which has a beta of 1.0 to his portfolio. If the investor
wants his portfolio to have a beta of 1.72, how much Stock C must he replace with
Stock D?

Sweatshirt Inc’s ROE is 20%. It’s dividend payout ratio is 70%. The last dividend, just
paid, was RM2.00. If its dividends are expected to grow at the company's internal
growth rate indefinitely, what is the current value of the company's common stock if
its required return is 18%?