Define the multiplier and rate of inflation, Macroeconomics

1 (a) List two concerns with inflation.

(b) Suppose that we are in a condition of fully flexible prices, but production of nails will not go above 200 chairs/month. What price will chairs sell for if market demand is characterized by: (a) P=425-1.5Q, (b) P=530-1.5Q, and (c) P=400-0.5Q, where P is in $/chair and Q is in chairs/month?

(c) What are two reasons why prices might be sticky?

Ans: First, consumers prefer stable and predictable prices. Companies recognize this.

2 (a) Net investment can be positive, negative, or zero, but gross investment can never be less than zero. Explain.

(b) Consider the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year.

2418_unit of output.png

i. If year 2 is the base year, give the price index for year 3.

ii. Give the nominal GDP for year 4.

iii. What is the real GDP for year 4?

iv. Tell which years you would deflate nominal GDP and which years you would inflate nominal GDP in finding real GDP.

3. (a) Explain why even small changes in the rate of economic growth are significant. Use the "rule of 70" to demonstrate the point.

(b) Are economic growth and progress synonymous? How might they differ?

(c) What phase of the business cycle is the Canadian and your provincial economy experiencing at the present time? Justify your answer.

4. (a) How is the unemployment rate affected if employment increases from 9 million to 9.5 million and the labour force increases from 10 million to 11 million?

(b) The table below shows the price index in the economy at the end of four different years.

2122_year of double.png

i. What is the rate of inflation in years 2, 3, and 4?

ii. Using the "rule of 70," determine how many years would it take for the prices to double at each of these three inflation rates?

5. (a) Complete the following table assuming that (a) MPS = 1/3, (b) there is no government and all saving is personal saving.


(b) Define the multiplier. How is it related to real GDP and the initial change in spending? How can the multiplier have a negative effect?

Posted Date: 2/20/2013 5:14:10 AM | Location : United States

Related Discussions:- Define the multiplier and rate of inflation, Assignment Help, Ask Question on Define the multiplier and rate of inflation, Get Answer, Expert's Help, Define the multiplier and rate of inflation Discussions

Write discussion on Define the multiplier and rate of inflation
Your posts are moderated
Related Questions
Q. Show the example on IS-curve? Figure We can explain this argument with the above figure.  1. Start by identifying R 1 and R 2 in lower graph.  2. Draw aggr

Q. Model of labor market in AS-AD model? Remember the model of labor market in AS-AD model with constant wages. On the y-axis, we had real wage and on x-axis, we had L. The res

process to calculate gross domestic product We just include finished goods and services - which is, anything that is sold directly to consumer. Electric power sold to a steel m

1. Consider the market for a particular type of computer memory chip. Would you expect the long-run (own-price) elasticity of supply to be larger or smaller than the short-run elas

Burwood Mining is raising capital of $500,000 for its next project from the following sources: Sources Amount $ Common stock 100,000

Relationship between the interest rate and the bond price Note that the higher the issue price, the lower the interest rate. In the same way, when the price of a government bon

The supply equation for widgets is P = 100 + 10QS. The elasticity of supply between quantity supplied of 9 and 11?

Explain how changes in the quality of health care will influence the demand for care.

INTRODUCTION TO DEMAND ANALYSIS: It is generally seen that market demand curve is downward sloping. Market demand curve (or sometimes called Aggregate demand curve) is nothing

how long will it take for you to help me with assignment