Macro-economics Essays - Macroeconomics, Economy, Economics

Macro-economics Essays - Macroeconomics, Economy, Economics Macro-economics Macro-economics GDP measure Expenditure approach Weakness of using GDP to measure wellbeing CPI Measure and its problem Unemployment Definition friction, structural and cyclical unemployment Inflation In the long run, the increase in MS leads to inflation Cost: Shoe leather cost, menu cost and tax distortion AD-AS Shape of AD and AS curves Monetary policy Open market operation Contractionary and expansionary monetary policy Draw graph to explain how monetary policy helps with inflation recession Fiscal policy Definition Instruments graphing Multiplier effect and crowding-out effect For graphing question, please draw graph clearly and label properly, and give brief explanation Graphing, labeling and explanations all carry marks. Graphing to illustrate monetary policy (expansionary and contractionary) Chinas central banktightened monetary policy by raising the interest rates it charges in open-market operations and on funds lent via its Standing Lending Facility. What type of monetary policy did Chinas central bank implement (expansionary or contractionary monetary policy)? What will be the impact on the economy, all else being equal? Use graph to illustrate. https://www.bloomberg.com/news/articles/2017-02-03/china-s-pboc-increases-interest-rates-in-open-market-operations MS2 Money supply, MS A D2 Y1 Y2 P2 Money demand at price level P AD1 Quantity of money 0 Interest rate r2 r1 (a) The money market (b) The aggregate-demand curve Quantity of output 0 Price level 3. ... which decreases the quantity of goods and services demanded at a given price level. 2. ... the equilibrium interest rate Increases... 1. When the RBA Decrease the money supply ... P1style.visibilitystyle.visibilitystyle.visibilitystyle.visibilitystyle.visibilitystyle.visibilitystyle.visibilitystyle.visibilitystyle.visibilitystyle.visibilitystyle.visibilitystyle.visibilitystyle.visibilitystyle.visibilitystyle.visibility Graphing to illustrate fiscal policy The above-mentioned moves underscore the leaderships determination to push up funding costs of short-term tenors to rein in leverage andswitchto the combination of less monetary stimulus and more fiscal support, after earlier easing fueled bubbles in bonds and the property market. What types of fiscal support can the government give? Use graph to illustrate its impact. https://www.bloomberg.com/news/articles/2017-02-03/china-s-pboc-increases-interest-rates-in-open-market-operations Quantity of output Price level 0 Aggregate demand, AD1 Increase government purchase or reduce tax rate AD2 7style.visibilitystyle.visibilitystyle.visibility Short answer question examples Explain shoe leather cost. It refers to the cost of converting between cash and other assets during high inflation. Explain interest rate effect that is used to explain the downward sloping curve of AD A lower price level reduces the interest rate, which encourages greater spending on investment goods. This increase in investment spending means a larger quantity of goods and services demanded. Explain sticky wage theory Nominal wages are slow to adjust, or are sticky in the short run. Wages do not adjust immediately to a fall in the price level. A lower price level makes employment and production less profitable. This induces firms to reduce the quantity of goods and services supplied. Is unemployment rate a perfect measure for unemployment? Justify your answer. It is not perfect measure because at least two groups of people cannot be accurately classified. Some people may claim to be unemployed in order to receive financial assistance, even though they arent truly looking for jobs. They are mistakenly classified as unemployed. Discouraged workers, people who would like to work but have given up looking for jobs after unsuccessful search, dont show up in unemployment statistics.