Questions: 1. Following table are the data for the Australian economy (β=1.6) in four selected years. Using Okun's law, fill in the missing data in the table.
|
Year
|
Actual Unemployment Rate (%)
|
Natural Unemployment Rate (%)
|
Potential GDP
|
Real GDP
|
|
2001
|
(a)
|
5
|
8000
|
7872
|
|
2002
|
5
|
(b)
|
8100
|
8100
|
|
2003
|
4
|
4.5
|
(c)
|
8266
|
|
2004
|
4
|
5
|
8250
|
(d)
|
2. An economy is described by the following equation
Cd = 14400 + 0.5(Y-T) - 40000r, Ip = 8000 - 20000r,
G = 7800, NX = 1800, T = 8000
a. Find the numerical equation relating planned aggregate expenditure (PAE) to output (Y) and to real interest rate(r).
b. The real interest rate is 0.133, find short-run equilibriumoutput.
c. Potential output, y*, equals 40,000. What real interest rate should be Reserve Bank set to bring the economy to fullemployment?
3. The demand for car in a country is given by D = 12,000 - 200P, where P is the price of a car. Supply domestic car production is S = 7000 + 50P.
a. Assuming economy is closed; find the equilibrium price and production ofcars.
b. The economy opens to trade. The world price of cars is 18 units. Find the domestic quantities demanded and supplied, and the quantity of imports or exports. Who will favour the opening of the car market to trade, and who will opposeit?
c. The government imposes a tariff of one unit per car. Find the effects on domestic quantitative demanded and supplied, and on the quantity of import or export. Who will favour the imposition of the tariff and who will opposeit?
4. Use the following economic data to calculate private saving, public saving and national saving.
a. Household saving = 20, business saving= 40, government purchases of goods service = 10, government transfers and interest payments = 10, Tax collection = 15, GDP = 220.
b. GDP = 600, Tax collection = 120, Government transfers and interest payments = 40, Consumption expenditures = 450, Government budgetssurplus = 10