Semester 2, 2012
ECON204
Macroeconomic Analysis
Tutorial 2, Week 4 Questions
1. Consider the following IS-LM model:
C = 200 + .25YD
I = 150 + .25Y - 1000i
G = 250
T = 200
(M/P)d = 2Y - 8,000i
i = i0 = 0.05
a. Derive the IS relation. (Hint: You want an equ
Semester 2, 2012
ECON204
Macroeconomic Analysis
Tutorial 8, Week 10
1.The present value of an infinite stream of dollar payments of $z (that starts next year) is
$z/i when the nominal interest rate, i, is constant. This formula gives the price of a consol
Semester 2, 2012
ECON204
Macroeconomic Analysis
Tutorial 11, Week 13
Answers
1. Country A has trade surplus and its output is below the natural level. The
policymakers goals are the output equal to its natural level and the balanced trade.
Given that the
Semester 2, 2012
ECON204 Macroeconomic Analysis
Tutorial 6, Week 8
Questions
1. Suppose that the production function is given by
Y 0.5 K N
a. Derive the steady state levels of capital per worker and output per worker in terms of the saving
rate (s) and th
Semester 2, 2012
ECON204
Macroeconomic Analysis
Tutorial 1 Questions
1. Suppose that the economy is characterized by the following behavioural equations:
C = 160 + 0.6 YD
I = 150
G = 150
T = 100
Solve for
a. Equilibrium GDP (Y)
b. Disposable income (YD)
c
Semester 2, 2012
ECON204
Macroeconomic Analysis
Tutorial 3, Week 5
1. Suppose that the firms markup over costs is 10%. The (medium-run) wage-setting
equation is W=P(1u), where u is the unemployment rate.
a. What is the real wage as determined by price-set
Semester 2, 2012
ECON204
Macroeconomic Analysis
Tutorial 4, Week 6
Questions
1. Consider the following model of the economy:
Wages are determined by the following equation W = Pe (2.5 - 10u).
Price is determined by the following equation P=2W
Production f
Semester 2, 2012
ECON204
Macroeconomic Analysis
Tutorial 7, Week 9
1. Suppose that the economys production function is
Y=K0.5(AN) 0.5
and that the saving rate (s) is equal to 16% and that the rate of depreciation () is equal to 10%.
Further, suppose that
Semester 2, 2012
ECON204
Macroeconomic Analysis
Tutorial 9, Week 11
1. Assume that that private spending depends on current and future income, current and
future taxes, and current and future real interest rate (which is consistent with theory that
consum
Semester 2, 2012
ECON204
Macroeconomic Analysis
Tutorial 10, Week 12
1. Using the IS-LM model with expectations of future variables, explain how the
policymakers might respond to the following shocks:
a. A collapse in consumer confidence. (Consider the ca