Economics Answers

THE GOVERNMENT REFERRED TO IN THE PREVIOUS QUESTION APPROACHES YOU FOR ADVICE ABOUT HOW TO INCREASE THE SIZE OF THE KEYNESIAN MULTIPLIER.

What is the theory of absolute advantage

A market failure occurs when there is an inefficient allocation of resources. In other words, the true cost of a good is not reflected in the price. This might be because of a third-party benefit but does not pay for that benefit. Or, it could arise due to a cost that is imposed on a third party without their consent and compensation. In turn, this leads to an inefficient allocation of resources as a third party may bear the cost or benefit. There are many causes of market failure which range from externalities to inefficient supply. The inefficient allocation of resources is not just limited to the supply of goods. Market failure can also occur through externalities. This can be both positive and negative

Propose and analyze any four causes of market failure.

Over the last two decades, there has been an emphasis, particularly in the English-speaking advanced countries, on reducing the role of government and on reforming public management by adopting aspects of private sector practice. The research programme on which this study is based was concerned with the fact that similar practices were being introduced in developing and transitional countries, often in association with economic adjustment. There has been considerable research on the difficult process of adjustment but little on the process and outcomes of public management reform for improved service delivery. 

question: Taking into consideration the theoretical knowledge you have gained on the broad views of the role of government, critically analyse the view South Africa’s government subscribes to in playing its role in the country. Justify your answer

1. A small open economy is characterized by having the following information,

Indicator In million dollars

Transfer Payments 54

Interest Income 150

Depreciation 36

Wages 67

Gross Private Investment (I) 124

Business Profits 200

Indirect Business Taxes 74

Rental Income 75

Net Exports (X-M)

18

Net Foreign Factor Income 12

Government Purchases (G) 156

Household Consumption (C) 304

A. Calculate GDP using expenditure approach

B. Calculate GDP using Income approach

C. Is there any difference between the two approaches of calculating GDP? Why?

Determine the equilibrium quantity: Qd=25-3P; Qs=10+2P 

Why do investors prefer to invest in ordinary shares as opposed to fixed bonds? 10marks

What the difference between the active portfolio and passive portfolio? 4marks

Which bond will sale higher between a callable bond and a non callable bond given they have same coupon rate? 4marks

Given that utility function=10x1^0.6,x2^0.4, where U=f(x1,x2) given Px1=10 ,px2=20, and Px3=1000 are units of proces x1 and x2,while B is money income.Required,Interpret the utility function,Construct budget constraint function,derive demand curvea for x1 and x2and prove they are actually demand curves then compute maximum utility given the income and prices of x1 and x2