Purchasing a house falls under ''investment'', while the other options like C) fall under ''consumption''. Since the question asks for ''investment component of GDP'', D) is the right answer.
Well we know the multiplyer has a value of 2.5, so any 1 unit change in G will cause Y to change by 2.5. Since we are interested in the value of G, we take 1/multiplyer = 1/2.5 = 0.4. So we now know that a shift of 0.4Y in G is the increase
This isn't relevant for us( since we don't consider exports and imports).
But the answer is C since:
Public Saving + Private Saving = Private investment - (Imports - exports)
=
-3% + private saving = 16%- 5%
Private Saving = 11+3 = 14
The money multiplier = 1/1-c1 and for the money multiplier to be larger than 1, c1 must be larger than 0, but smaller than 1. So to answer, the question, you must look at which of these influence c1 directly, and that is none.
Bt / Yt = (1+r-g)*Bt-1/Yt-1 + (Gt-Tt)/Yt
Given :
Bt-1/Yt-1 = 60
Gt-Tt/Yt = 1.2
r = 0.03
You want this year's debt to be the same as last year's, so also set Bt/Yt = 60 and solve for g.
Why would it positive (i.e. Answer B)? Wouldn't during a boom the revenues of the government exceed its expenses, leading to a negative budget deficit?
Because decreasing returns to capital implies that multiplying K by a certain number leads to a smaller number than the initial increase in K. E.G) if you quadruple K for answer B you only get double Y, not four times Y.
On the other hand, if you quadruple capital in B, your output actually decreases. Since the question wants RETURNS TO CAPITAL, it implies that an increase in K will lead to an increase in Y. Hence, since B doesn't do this, it is wrong.
+4
Best Answer
Anonymous Package
10 months ago
do we have concepts like "principle of neutrality of money" and "Lucas critique" in our book? cause in the exam she published she didn't take out these questions
Thank you very much.
You calculated nominal interest rate 4% minus growth 3%. But why is it not nominal interest rate minus inlation rate to recieve real interest rate. Because in the equation we use the real interest rate minus the growth rate. But calculating it like this would not end up at answer D. WHy do we need to use the nominal interest rate here?
I used real interest rates, so my r= -1%. Had I used nominal I would have gotten -1.01/(1.01), implying a -100% debt to GDP (which doesn'tâ€‹ make sense). By using real (4-2)=2, and subtracting growth from it (2-3)=-1, my final equation led to -1%/-1%= 100%
Normal growth rate implies growth rate at equilibrium. In order to keep unemployment rate at a constant, we must set Gy = 0.02, as this is the only way to ensure equilibrium. You can also think of it as setting inflation to be constant (equilibrium). So: 0 = -0.5(Gy -0.02). Rearranging leads too: Gy=0.02, which means growth rate is 2%.
- How do they calculate for question 21 ?
- For question 32, why is it B and not A ?
-How is it calculated for question 35 ?
- Why is it D for question 37 ?
- Why is it B for question 49 ?
Question 21:
Its easiest to think about it as if there were four month without any employment, and that from then on people started getting employed . Hence, four month of unemployment means 4*200000= 800 000 unemploymened. From then on every month the same number go in and out, so it stays at 800 000. Hence D.
Question 32:
Nominal wages will change, as part of nominal wages is the expected price level of the year. If money supply is higher, expected price levels will go up. Nominal wages will change. In medium run equalibrium everything is being produced at natural output, so inflation is zero. Hence price level doesn't change, so the answer is B. (Though I don't think we covered principle of neutrality of money).
Question 35:
Not relevant for us (not covered)
Question 37:
Answerd above
Question 49:
Don't think its relevant for us.
IS curve is related to Goodmarket and also demand. So higher credit interest rates, less investment, less spending and less demand. So IS curve shifts left
Standard of living isn't measured using GDP per capita (since PPP isn't counted here), hence it isn't A, since you can't compare the standard of living without consider the Purchasing power parity
Looking at the data we can see that inflation is most constant when unemployment is 5%. Since we want inflation, we know that we want unemployment to be lower than natural rate of unemployment (from the Phillips equation). Since inflation is constant at 5% unemployment we can say that is the natural rate, so to have inflation we need unemployment below 5%, hence C
Well we know the multiplyer has a value of 2.5, so any 1 unit change in G will cause Y to change by 2.5. Since we are interested in the value of G, we take 1/multiplyer = 1/2.5 = 0.4. So we now know that a shift of 0.4Y in G is the increase
At Natural rate of unemployment, expected inflation is equal to actual inflation. so you take the expected inflation to the other side of the equation, and since they are equal you get: 0=-2Ut+0.1. Rearranging this you move the 0.1 to the other side and get : -0.1/-2 = 0.05. Hence the answer is 5%
First, real interest rate = 10-7= 3%. Next, we know that debt in a year is equal too 1 plus real interest minus growth, times the debt in the previous year + the current year's deficit. In this case (1+ 3%-3%)*100% + 4% = 100%+4%= 104%
AS there is 5% of return on assets (200*0.05=10) and 4% of going interest on liabilities (160*0.04=6.4) you have a return of 10-6.4= 3.6. As a ratio to capital you obtain: 3.6/40= 0.09, which is an expected rate of return on capital of 9%.
If you want to have an easily comprehendable, text-lightweighted and colorful summary (or are just too lazy to read a lot of stuff), crisis part missing because it's only definitions.. Good luck you all!