ECO202: Tutorial Worksheet 2
1. Using the multiplier. Consider the following economy (similar to the one described in
I = 150
G = 150
T = 100
Worksheet 1): C = 160 + 0.6YD
a. Consider a decline in rea
ECO202: Tutorial Worksheet 1
1. Suppose that the economy is characterized by the following behavioral equations below.
C = 160 + 0.6YD
I = 150
G = 150
T = 100
a. Solve for equilibrium GDP (Y).
b. Solv
ECO202: Tutorial Worksheet 7
1. Consider the following prices for government bonds and foreign exchange in Canada and
the United States. Assume that both government securities are one-year bonds, payi
ECO202: Solutions to Worksheet 2
1. Using the Multiplier
a. Equilibrium output is 1000. 2% of 1000 = 20 units
b. Output falls by 20 units. The multiplier in the simple economy is 1/ (1-c1): Y =
(1/ (1
ECO202: Tutorial Worksheet 13
1. The estimated Okuns law for Canada is given by u t u t 1 0.33( g yt 3.7%) .
a. What growth rate of output leads to an increase in unemployment rate of 1% per
year? How
ECO202: Tutorial Worksheet 9
1. Consider two fictional economies, one the domestic country and the other the foreign
country. Construct a balance of payments for each country given the following list
ECO202: Tutorial Worksheet 12
1. Spending Shocks: Using the AS-AD model, show the effects of each of the following
shocks on the position of the WS, PS, IS, LM, AD and AS curves in the medium-run.
The
ECO202: Solutions to Homework Assignment 2
1. True, False or Uncertain
a. Uncertain, as this statement may be True or False depending on the assumptions made.
If we assume that individuals did not tra
ECO202: Solutions to Worksheet 7
1. Interest Parity
a. The nominal return on the Canada bond is 10,000 / (9615.38) 1 = 4%. The nominal
return on the US bond is 5%.
b. Uncovered interest parity implies
The Science of Macroeconomics
Gross Domestic Product: Expenditure and Income
Two Definitions:
Total expenditure on domestically-produced final goods and services
Total income earned by domestically-lo
ECO 202: Homework Assignment 2
Due Wednesday, January 4th, 2012 at the start of class.
1. True/False/Uncertain. Read the statements carefully. Decide whether the statement is
true, false or uncertain.
ECO202: Tutorial Worksheet 6
1. Coordination and Fiscal Policy
a. Y = C + I + G + X Q = 20 + 0.8*(Y - 10) + G + 0.3Y*- 0.3Y
Y = [1/(1 - .8 + .3)](12 + G + 0.3Y*) = 2*(12 + G + 0.3Y*) = 44 + 0.6Y*
The
ECO202: Solutions to Test 1
1a. False a real appreciation indicates domestic goods are now relatively more expensive and
that foreign goods have become relatively cheaper.
If domestic consumers observ
ECO202: Solutions to Worksheet 1
1. A Simple Economy
a. Y = 160 + 0.6*(Y 100) + 150 + 150 Y = 1000
b. YD = Y T = 1000 100 = 900
c. C = 160 + 0.6*(900) = 700
2. The Concept of Equilibrium
a. If output
ECO202: Tutorial Worksheet 3
1. Suppose that a persons wealth is $50,000 and that her yearly income is $60,000. Also
suppose that her money demand function is given by: Md = $Y(0.35 i). Note: Here the
ECO202: Solutions to Worksheet 3
1. Money Demand
a. i=0.05: Money demand = $18,000; Bond demand = $32,000
i=0.10: Money demand = $15,000; Bond demand = $35,000
b. Money demand decreases when the inter
ECO202: Tutorial Worksheet 4
1. A bond promises to pay $100 in one year.
a. What is the interest rate on the bond if its price today is $75? $85? $95?
b. What is the relation between the price of the
ECO202: Solutions to Worksheet 4
1. Bonds and the Interest Rate
a. i=(100/$PB) - 1; i (rounded) = 33% ; 18% ; 5% when $PB =$75; $85; $95.
b. Negative.
c. $PB =100/(1.08) $93
2. The Multiplier Revisite
ECO202: Tutorial Worksheet 5
1. Suggest a policy mix to achieve the following objectives:
a. Increase Y while keeping i constant.
b. Decrease the deficit while keeping Y constant. What happens to i? T
ECO202: Solutions to Worksheet 5
1. Policy Recommendations
a. Fall in T shifts IS right. Increase in M shifts LM right. Output could increase
without an increase in the interest rate
b. A contractiona
ECO202: Tutorial Worksheet 6
1. Consider the following open economy. Suppose is fixed and equal to one.
Consumption, investment, government spending, and taxes are given by:
C = 10 + 0.8(Y T)
I = 10
G
ECO202: Tutorial Worksheet 8
1. Consider the following IS and LM equations in the open economy:
Ee
IS : Y C (Y T ) I (Y , i ) G NX Y , Y *,
1 i i *
M
LM :
YL(i )
P
a. Show the effect of a decrease i
ECO202: Solutions to Worksheet 8
1. The Effects of Changes in Foreign Variables
a. IS shifts left, because domestic exports fall given any exchange rate (and hence
any value of the interest rate). Out
The Focus of Macroeconomics
Macroeconomics focuses on the behaviour of Key Macroeconomic Variables
including:
Real GDP a measure of aggregate output, income, and spending (under certain
assumptions)
I
National Income: Where it Comes From and Where it Goes
Outline of Model
A closed economy, market-clearing model
Supply side
o factor markets (supply, demand, price)
o determination of output/income
Chapter 9
In this chapter, you will learn:
Facts about the business cycle
How the short run differs from the long run
An introduction to aggregate demand
An introduction to aggregate supply in the sho
Macroeconomics Theory and Policy
Exchange Rates in the Medium Run
Chapter 13
Masoud Anjomshoa
1
Flexible Regime):
Open Economies in Medium Run (Flexible Regime
IS : Y
co
I (Y , i ) NX Y , Y * ,
c1 ( Y
Macroeconomics Theory and Policy
Expectations: The Basic Tools
Chapter 18
Masoud Anjomshoa
1
Expectations, Real and Nominal
Interest Rates:
.
Nominal Interest Rate, i: Rate of return on assets, measur