Explain the following:
Depict graphically the equilibrium real GDP for a private closed economy using both expenditure-output and leakage-injection approach. Now add export and import and determine the new point of equilibrium and explain what happens to the slope of S+M and AE schedule.
Given MPS=.2 and MPM=.2 in order to increase real GDP by $75 million, what should be the change in investment?
Carefully explain how unemployment can be caused by a decrease in aggregate demand or decrease in aggregate supply and in each case specify the price level effect (use diagrams).
Explain the following:
What is the impact of the following on AD and AS, as well as equilibrium price level and the level of real GDP? Use diagrams.
Fear of economic depression by consumers and a sizable increase in labour productivity.
An increase in net export and an increase in nominal wages.
What are the government’s fiscal policy options for an inflationary gap caused by demand pull inflation? Use AD-AS model to show the impact on the price level. Which of these fiscal options do you think a person who wants to preserve the size of Government might choose? A person who thinks the public sector is too large?
Explain the following:
Carefully explain what is the difference between Aggregate Demand and Aggregate Expenditure and what explains the negative slope of AD curve?
Carefully explain if the following statements are true or false and explain why?
Total public debt is more relevant to an economy than the public debt as a percentage of GDP.
Non-discretionary fiscal policy can get rid of a recession, so there is no need for expansionary fiscal policy.
The economy is in a recession and a member of parliament suggests an increase in spending but at the same time raising taxes to pay for increased spending. Carefully explain if this is a wise suggestion?
