Expert answer:Econ Homework

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macroeconomics_assignment_3_fall2015.docx

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Macroeconomics: Assignment # 3
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What is a business cycle? Discuss its different phases. Why do business cycles occur?
What is an output gap? How is it measured? If a country’s actual unemployment rate, natural rate of
unemployment and GDP are 8%, 5% and $16 trillion respectively, what will be the output gap?
Distinguish between different types of unemployment?
In a deteriorating employment situation which sections of people suffer most?
A country has a population of 100 million of which 65 million are in the working age group. Of them 47 million are
engaged in some socially recognized gainful activities, 1 million are engaged in some form of illegal activities. Of
the remaining 17 million, 8 million are full time students, 5 million are home makers, 3 million are actively looking
for work, and the rest are sitting idle at home.
(i)
Find the unemployment rate
(ii)
Find the labor force participation rate.
Distinguish between inflation, hyperinflation, deflation and disinflation.
Why is inflation so high on the agenda of policy makers?
How are the following sections of people affected by inflation?
Landlords
(ii) taxpayers
(iii) wage earners (iv) lenders and (v) borrowers.
If , for purchase of the same basket of goods it costs $ 210 today compared to $200 last year what has been the
rate of inflation?
What is Say’s Law? Explain.
What is the Classical view on long-run and short run equilibrium? Show with diagrams.
What is the Keynesian Critique of Classical System?
When does macroeconomic equilibrium occur? Why is it so?
Distinguish between recessionary and inflationary gaps. Show with a diagram the two gaps.
What do you mean by multiplier effect? If tax rate = 20%, MPC = 0.9, MPI = 0.1, what will be the effect of an
increase of investment by $100 million on equilibrium output?
What are automatic stabilizers? List three automatic stabilizers. How does an automatic stabilizer moderate
economic fluctuations?
What sort of fiscal policy will you recommend when the country is experiencing (i) a recession, (ii an inflation?
What are the effects of a large fiscal deficit? Comment on the size of U.S. public debt? What measures would you
like to take to reduce it?
What is money? What are the functions of money? Are the following money?
i)
credit card
ii)
check
iii)
checking account
Distinguish between M1, M2 and M3.
What is the value of money? How is it determined? What are the determinants of demand for and supply of
money?
Explain the quantity theory of money.
Show with a diagram that in full employment money plays a neutral role.
A super bank has a deposit of $ 100 million, reserve of $10 million, outstanding loan of $90 million and government
bond of $ 5 million, draw the balance sheet of the bank. If a new deposit of $10 million arrives from abroad, show
credit creation by the banking system for two rounds. What will be the final balance sheet of the bank?
What are the instruments of monetary policy? Discuss briefly each of them. How are they used to control inflation/
promote growth and employment? Which one is the most frequently used instrument of monetary policy?
What are the determinants of economic growth of a country?
What are the determinants of productivity growth?
Over 2000-2010, if a country’s real GDP increases from $1000 billion to $1300 billion , and population increases
from 100 to 110 millions, how many years will it take for the country’s per capita real GDP to double?
Although technological progress is considered to be the engine of growth, why are expenditures on research and
development sub-optimal? What have been the major technological advances over the last three centuries?
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