Hey guys, with my upcoming Macroeconomics assessment they posted a bunch of possible questions. However, they didn't post any answers and it is really frustrating not knowing if what I'm doing is right or completely wrong. I was hoping some of you guys could help out and post some answers to the questions? Any help would be greatly appreciated!
The following equations describe planned spending for a closed economy.
C = 100 + 0.8(Y-T) , I = 200 , G = 200, T = 50 + 0.2Y
(a) Write out the equation for the private saving function for this economy.
(b) What is exogenous (autonomous) expenditure and what is the value of the multiplier? Calculate
equilibrium output for this economy. Show how you obtained your figure.
(c) Calculate the size of the budget surplus at equilibrium output.
(d) What is the size of the balanced budget multiplier for this economy?
(e) Suppose the government introduces an expansionary fiscal policy by increasing government
purchases by 40. Calculate the new equilibrium output.
(f) Show in a diagram and explain the effect of an increase in the marginal tax rate to 0.3. Calculate
the new equilibrium output.
(g) Explain how the effect of the increase in the marginal tax rate in (f) may be a level of output less
than what was calculated?
The government of New Holland is experiencing lower energy costs due to new technology in
extracting energy sources such as gas and oil. Use the supply and demand model (and a diagram) of
the labour market to explain the effect on labour demand and supply and the levels of employment
and unemployment, and the real wage
For the question above I'm pretty sure there will be a shift to the right of the demand curve, increasing the real wage. However I'm unsure of the effect on employment and unemployment?
The country of New Holland is considering the introduction of a compulsory retirement saving
scheme. Under this scheme all workers are required to save ten per cent of their annual wages and
salaries until they retire. Use the supply and demand model (and a diagram) for saving and investment to explain the likely
effects of this scheme on national saving, investment and the real interest rate in New Holland.
Explain the effects on employment of the saving scheme.
(You can assume that New Holland is a closed economy).
Explain the various factors that will influence a firm’s decision to purchase a new piece of capital
equipment. What condition would need to be satisfied for the firm to be willing to invest in the new
capital?
Use the Keynesian aggregate expenditure model and appropriate diagrams to explain the effect
on equilibrium GDP of an exogenous decrease in exports
A government of Bananarama is considering its fiscal policy response to a decline in exogenous
desired expenditure by households and firms which has produced a large contractionary output gap.
Two alternative policies are under consideration:
– An increase in government spending of $20 billion, or
– A one-time cash payment to all households, which also has a total value of $20 billion
Use the 4-sector Keynesian aggregate expenditure model to explain which of these policies will have
the largest effect on planned aggregate expenditure and on the level of output.
The following equations describe planned spending for a closed economy.
C = 100 + 0.8(Y-T) , I = 200 , G = 200, T = 50 + 0.2Y
(a) Write out the equation for the private saving function for this economy.
(b) What is exogenous (autonomous) expenditure and what is the value of the multiplier? Calculate
equilibrium output for this economy. Show how you obtained your figure.
(c) Calculate the size of the budget surplus at equilibrium output.
(d) What is the size of the balanced budget multiplier for this economy?
(e) Suppose the government introduces an expansionary fiscal policy by increasing government
purchases by 40. Calculate the new equilibrium output.
(f) Show in a diagram and explain the effect of an increase in the marginal tax rate to 0.3. Calculate
the new equilibrium output.
(g) Explain how the effect of the increase in the marginal tax rate in (f) may be a level of output less
than what was calculated?
The government of New Holland is experiencing lower energy costs due to new technology in
extracting energy sources such as gas and oil. Use the supply and demand model (and a diagram) of
the labour market to explain the effect on labour demand and supply and the levels of employment
and unemployment, and the real wage
For the question above I'm pretty sure there will be a shift to the right of the demand curve, increasing the real wage. However I'm unsure of the effect on employment and unemployment?
The country of New Holland is considering the introduction of a compulsory retirement saving
scheme. Under this scheme all workers are required to save ten per cent of their annual wages and
salaries until they retire. Use the supply and demand model (and a diagram) for saving and investment to explain the likely
effects of this scheme on national saving, investment and the real interest rate in New Holland.
Explain the effects on employment of the saving scheme.
(You can assume that New Holland is a closed economy).
Explain the various factors that will influence a firm’s decision to purchase a new piece of capital
equipment. What condition would need to be satisfied for the firm to be willing to invest in the new
capital?
Use the Keynesian aggregate expenditure model and appropriate diagrams to explain the effect
on equilibrium GDP of an exogenous decrease in exports
A government of Bananarama is considering its fiscal policy response to a decline in exogenous
desired expenditure by households and firms which has produced a large contractionary output gap.
Two alternative policies are under consideration:
– An increase in government spending of $20 billion, or
– A one-time cash payment to all households, which also has a total value of $20 billion
Use the 4-sector Keynesian aggregate expenditure model to explain which of these policies will have
the largest effect on planned aggregate expenditure and on the level of output.