Economics Homework to solve.

Macroeconomics: Assignment 2

1.   What are the four components of aggregate expenditure? Which one is the largest? Which one is the most volatile?

2.  Draw a consumption function, and discuss its characteristics.

3.  Disposable income and consumption expenditure (in billion dollars) of a country are given below:

Disposable income (Yd)	Consumption
1000	1200
2000	2100
3000	3000
4000	3900
5000	4800

a)  Find APC and APS at Y_d = $5000 billion.

b)  Find MPC.

c)  Find autonomous consumption.

d)  What will be the equation of the consumption function?

e)  What will be the consumption at Y_d =$10000 billion?

4.  Discuss the determinants, other than disposable income, that determine consumption.

5.  Discuss the permanent income hypothesis.

6.  Account for the low saving rate of Americans compared to people of other countries of the world. What are the consequences of low saving rate for a country?

7.  Distinguish between proprietorship, partnership and corporation.

8.  Distinguish between:-

a)  Stocks and bonds

b)  Preferred stocks and common stocks

c)  Capitalization and market capitalization.

9.  A corporation has $ 200 million in bonds, $ 100 million in preferred stocks, and $ 300 million in common stocks.

a)  What is this company’s capitalization?

b)  What is this company’s market capitalization?

c)  How much would it take to control this company, theoretically, and practically?

10.  Discuss the major sources of revenue and heads of expenditure of the U.S. federal government.

11.  Distinguish between:-

a)  Discretionary and non-discretionary expenditures.

b)  Taxes and Subsidies

c)  Direct and indirect taxes

d)  Progressive, proportional and regressive taxes

e)  Fiscal deficit and surplus

f)  Fiscal deficit and public debt

12.  If you earn $50,000 and pay $ 10,000 in taxes, what is your average tax rate? Suppose your income increases to $ 60,000 and taxes increase to $ 12,500, what will be your average and marginal tax rates?

13.  Discuss the role of government in a mixed economy like U.S.A.

14.  On the capital market of an economy, what will be the effect of the following:- (show with diagrams)

a)  An increase in taxes (T)

b)  Tax cut

c)  An increase in government expenditures (G)

d)  A decrease in G

e)  A balanced budget increase in T and G

f)  A balanced budget decrease in T and G.

15.  Distinguish between (a) an open economy and a closed economy; (b) trade deficit and trade surplus.

16.  What is the basis of international trade?

17.  Derive the basic trade identity.

18.  What is exchange rate? Distinguish between appreciation and depreciation of a currency. How are exchange rates determined?

19.  Is there any relationship between fiscal deficit and trade deficit? Account for the same, using a diagram.

20.  What is GDP? Distinguish between GDP, GNP, NDP, NNP and Green GDP. How good is GDP as a measure of standard of living of people of a country? Give reasons for your answer.

21.  Nominal GDP of a country for different years, and corresponding GDP Deflators  are given below:-

Year	Nominal GDP (Billion $)	GDP Deflator ( 2010=100)	Real GDP (Billion $)
2007	1000	95
2009	1020	98
2011	1050	103
2013	1100	105

Fill in the gaps in the above table, and find the average annual economic growth rates over

(a)  2007-2013 and (b) 2011-2013.

22.  Expenditures and revenue of different sectors of an economy are given below:-

Sectors	Expenditures (Million $)	Revenue (Million $)
Wheat	Wages  100	300
	Interest   80
	Dividend  120
Flour	Wages  120	600
	Interest  90
	Dividend  90
	Purchase of wheat  300	900
Bread	Wages   80
	Interest  100
	Dividend  120
	Purchase of flour  600

Find GDP using (i) the final goods approach (ii) the value added approach and (iii) the income approach