Economics Answers

Suppose a country has total GDP(Y)=\$12 trillionconsumption (C)=\$8 trillion government spending (G)=\$2 trillion Investment $3 trillionand taxes . a. What is the level of net exports or balance of tra $trillion bWhat is the level of public savings? What is the level of private savings? $ trillion What is the level of net capital outflow ?

Suppose we observed an economy in which changes in the money supply produce no changes whatever in nominal GDP. What could we conclude about velocity?

8. Suppose price levels were falling 10% per day. How would this affect the demand for money? How would it affect velocity? What can you conclude about the role of velocity during periods of rapid price change?

9. Suppose investment increases and the money supply does not change. Use the model of aggregate demand and aggregate supply to predict the impact of such an increase on nominal GDP. Now what happens in terms of the variables in the equation of exchange?

Suppose the Fed were required to conduct monetary policy so as to hold

the unemployment rate below 4%, the goal specified in the

Humphrey–Hawkins Act. What implications would this have for the

economy?

2. The statutes of the recently established European Central Bank (ECB)

state that its primary objective is to maintain price stability. How does

this charter differ from that of the Fed? What significance does it have

for monetary policy?

3. Do you think the Fed should be given a clearer legislative mandate

concerning macroeconomic goals? If so, what should it be?

You are looking at cost curves. The value associated with the marginal cost

(MC) on the graph is higher than the value associated with the corresponding

average variable cost. (AVC). In other words MC is above AVC. This means:

Select one:

O a. average variable cost (AVC) is increasing

O b. average variable cost (AVC) is falling

O c. average variable cost (AVC) is remaining constant

O

d. none of the above

MC 2) The Ricardian model suggests that

real wages increase along with a country’s

a) comparative advantage

b) absolute advantage

c) endowment of capital

d) use of prohibitive tariffs

popeyes income declines and, as a result he buy more spinach. in spinach an inferior or a normal good? what happens to propeye's demand curve for spinach?

Cuba is an exporter of grain to North Korea. In a closed economy Cuba must have a domestic price that is _____ the world price of grain.

A) less than

B) greater than

C) equal to

D) close to

Q.2 a) An economy following a flexible exchange rate regime is in its long run equilibrium while suffering from a trade deficit. Would a reduction in government spending be helpful in eliminating the trade deficit? Explain indicating all co-movements both in the short run and the long run (assuming that Ricardian Equivalence holds)? How would this policy affect the trading partner of the home country?

Use the IS-LM-FE and the foreign exchange market diagrams to explain.

b) Using the analysis in part (a), indicate why the central bank of the trading partner may opt for a fixed exchange rate regime. If the exchange rate were to be fixed between the initial and the new

equilibrium values (in domestic economy), what do you think the policy would imply? What effects

would it have on the home economy and the trading partner? Use the foreign exchange market and the FV-Ms diagrams to explain.

(b). Will there be any relationship between inflation and unemployment either in the short run or in the

long run in the context of part (a)? What factors account for the different opinions of economists aboutthis relationship?

c) What is price stickiness? Why do New Keynesians believe that allowing for price stickiness in macroeconomic analysis is important?

use the AD-AS model to explain how an expansionary monetary can affect output/income