Economics Answers

All Inferior goods are Giffen goods.

Show how the migration of workers from country A to country B will affect the labour supply, labour demandand the equilibrium wage of bothcountries.

A small and open country is described using the following two equations:

Y = C Y – T) + I (r* ) + G – N X(e) -------------------------------1

M/P = L(r*, Y) ------------------------------------------------------------------------------2

a. If the country described above suffers from a recession, should the state government use

monetary or fiscal policy to stimulate employment? Why? (8 Marks)

Use the Mundell-Fleming model to answer the following questions about France.

a) If France suffers from a recession, should the state government use monetary or fiscal policy to stimulate employment?

b) If France prohibited the import of wines from Ukrain , what would happen to income, the exchange rate, and the trade balance? Consider both the short-run impacts

Using the theory of liquidity preference, explain why an increase in the money supply

lowers the interest rate. What does this explanation assume about the price level? (5

marks)

What factors will cause shift in money demand

what is liquidity trap (3mrks)

Distinguish between (3 marks each)

i. Open market operations and exchange rate

ii. Monetary and fiscal policy

iii. Classical and Keynesian aggregate supply curve

iv. Structural and cyclical unemployment

v. Phillips curve and IS curve

write a short notes of the following (15 marks)

a) aggregate demand curve

b) monetary transmission mechanism

c) natural rate of unemployment

What is production possibility frontier ? Explain through diagram.