Macroeconomics

at Maastricht University

When will answer key be out
Why D and not C ?
Because the decrease in tax is not enough to offset the decrease in government spending so IS moves first left, then a little bit right but is still left from the original IS curve.
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Can somebody please explain how they solved Question 2 a) ii), I do not understand why it requires unemployment to be 1% above the natural rate. Thank you for your help!
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Why would an increase in taxes wouldn't increase investments? As S + ( T-G) = I ---> hence , an increase in taxes should increase investments ?
thats for a closed economy
Where can I find the net present value formula or where is it in the book?
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So how can I find anything about it. I mean i dont get the given answer at all
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I don't get Question 12.. need help plsss
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I don't think so. We need to calculate the current interest rate for that bond. You do so by simply dividing 100/94 what gives you 1.0638. I believe answer D must be correct
no, 8.5 % is the correct one
Can someone explain this?
I don't get the difference between B) and C) because if the value of the goods increase, the cost of living will obviously also increase
Well normally when we compare the standard living, we need to use the PPP, not the GDP
What is "the difference between the official and correct measures of the deficit"?
Correct means Inflation-adjusted and official is not
Why is it D
When you have U=Un it's expected to have Pi=Pi*, here it's not the case , meaning that there is the same number of unemployed people but the prices increase. In order to counter that, Fed will try to stimulate the economy by " creating money" , so the loan rate will decrease and people will be able to buy more goods, leading to an increase in production and so reduction of unemployment. ( Hope I don't mistake)
( And to go back to the question, it's the monetary expansion that allow this )
Can someone explain this one?
I would say that policy makers will try to increase inflation more than necessary and so try to increase outputs and consumption ! That would lower up unemployment to the expected rate ---> lead to answer D
I did 2 past exams now, (closed), both failed. I have done the SF crash course & exam training and I feel really prepared though. Anyone who would have some tips to give me a greater chance of passing tomorrow ? Thanks a lot
Do as many old exams as you can do and write down the mistakes you made on a separate paper. Tomorrow a couple of hours before the exam you can do one last exam existing only of the mistakes you made. No way you can fail this way if you understood the concepts.
Does someone have an explanation for this one?
look at the formula of aggregate output
What is wrong with B? In a closed economy , there is no import or export. Following, no import or exports?
C) is only an assumption for the closed economy, and therefore not the equilibrium condition. The equilibrium conditions are Y=Z and I=S + (T-G)
Can someoe explain this one?
A and B take place in the short run. C is not correct because the nominal wage will increase. The real wage changes only in the long run, so D is correct.
Why is the answer 192 ?
The basic rule, which we learnt, can not be applied here for the multiplier. You need to substitute Y-T for disposable income and solve for the new multiplier, which should be then around 1.92.
Why is it D) since fiscal policy doesn't use the policy rate? They use taxes or government spending instead
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Yes but here, they talk about fiscal consolidation not monetary consolidation
When fiscal consolidation takes place, it will lead to a lower demand due to the increase in taxes. In order to boost Y, the central bank will decrease the policy rate so investing will be cheaper to get the Y back at the original level.
How do you calculate this?
((115.000-100.000)/115.000)) x 0.3 = 0.039 So its B.
Why is it D?
A cyclically adjusted deficit is a budget deficit caused by a slowing economy rather than fiscal policies such as increasing discretionary spending or decreasing the tax rates.
Don't people consume less during a recession wherefore the marginal propensity to consume is smaller? Because this would result in a smaller fiscal multiplier
I'm not sure about this. How she explained it in the lecture was that prices are higher and income is lower during a crisis, thus you have to spend a bigger part of your smaller income on consumption, which implies a larger propensity to consume. This was just an extra story she said. The question was actually about the fiscal multiplier and marginal propensity to save
We don't really take that into consideration like this in the first chapters. But when the outlook of the consumers changes, the multiplier is affected. So the answer is yes. However, you can argue that saving is equal to I investment, that's a problem in the model she mentioned in the lecture
The LM curve isn't it supposed to be flat? I don't get why answer B) is correct
The LM-curve is flat when the Central-Bank chooses the interest-rate and adjusts the Money-supply depending on the Economy. In this case the Central-Bank chooses the Money-supply and leaves all other factors to the market, meaning the higher the output the higher the interest rate
Thanks !
Why is it D) instead of C)?
C) is only an assumption for the closed economy, and therefore not the equilibrium condition. The equilibrium conditions are Y=Z and I=S + (T-G)
Why is it D)?
An increase in income will shift the money demand curve to the right. A reduction or an increase in the interest rate will lead to a movement along the money demand curve, and won't shift it
Does anyone knows why A) isn't correct? Because in the goods market equilibrium Y=Z
Y = Z means that output equals demand. Y = C+I+G so output is equal to consumption plus investment plus government spending. Thus, A is not correct
Thanks!
Can someone briefly explain why it is A) not D). thanks in advance
As the market becomes more competitive, m will decrease. Since the PS curve is defined as W/P = 1/(1+m), the PS curve will shift up
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get out
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Hey, where do you find the solutions? does someone maybe have a link?
Because the Phillips-Curve tells us, that a bigger difference between u(t) and u(n) will result in false expected inflation. In this case when u(n) is underestimated, the inflation will also be underestimated. Therefore, the CB would impose a policy that increases inflation.
Because on your horizontal axis you now have employment N instead of unemployment U
Why is A=1?
Because Ae=A so A/A=1
Thank you!
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Hi I know this sound a little stupid but do you know why we dont have this chapter in the book anymore? The edition of the book or it is not just in every edition?
In the book we dont have anything relate to money growth or something but in the exams i still saw some questions so it is really annoying
In my year we had a different book which is why this might not relate to anything you learn now in the course. As I am no longer aware of this course’s organisation, I would advise you to consult your tutor or your course coordinator for more information on how this subject might be approached or if it still is relevant for your exam.
Where can I find this knowledge????? Im sure we dont have that thing in our lecture and the current balance is in chapter 17...
? what is that?
Just a typo, sorry.
shouldn't it be greater than 0?
as c1 is between 0 and 1, 1-c1 is a number smaller than 1
so 1/ number smaller than 1 results in a number greater than 1 so that's the multiplier effect
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in chapter 6, nominal vs real interest rate, how to derive rt from it, in 1. I wrote (i+it)pt but it should be (1+it)pt
Does anybody know where can i get the keys for questions and exercises in the book? Thanks.
I found some of them via google, literally copy pasted the exercise , but haven't found a place with all answers together
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Is this summary's from the 7th edition?
Don't know for sure but it covers everything thing for last year's exam which was based on the 7th edition
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how do you solve 41?? Investment per worker
Output per worker = 100 000 Savings = 1-c = 1-0.6 = 0.4 Investment per worker = 0.4*100 000= 40 000
What is the difference between real and nominal?
nominal looks at prices while real looks at goods. Don't know in which sense you are asking but this is the most general. Sorry for the late reply.
did we discuss fine tuning policies in the course ?
I think in Chapter 21
How do you solve this ?
Investment per worker = Savings*output per worker. Output per worker = 100 000 Savings = 1-c = 1-0.6 = 0.4 Investment per worker = 0.4*100 000= 40 000
Can somebody please explain why it is D? I don't see how any of the options fit into the 3 definitions of GDP
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.
Did we cover Fisher?
No we did not, don't worry
we discussed it in my tutorial so maybe just in case read it
How do you solve this ?
Here it is:
Does anyone know how to do these? Thanks in advance!
For 46 and 47 Check the box on page 267
Can somebody explain why it isn't c? If the central bank buys bonds, they increase the money supply, so interest rate falls
don't worry, we didn't cover upward sloping lm curve
Did we cover sacrifice ratio?
No, if they put something like that at the exam, just complain about it