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    Inter. Macro Assignment

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    muyi kunle
    This document provides the instructions and questions for an intermediate macroeconomics exam. The exam consists of three questions. Question 1 has two parts asking students to (i) distinguish between crowding-out and crowding-in effects of fiscal policy and suggest measures for crowding-in, and (ii) analyze the short-run and long-run effects of various economic changes using IS-LM/AD-AS diagrams. Question 2 asks students to (a) derive IS and LM curves, (b) find equilibrium levels, (c) analyze the effects of increased government spending, (d) summarize the effects of monetary policy changes, and (e) consider policy mixes to decrease deficits without reducing output or investment. Question 3

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    Inter. Macro Assignment

    Uploaded by

    muyi kunle
    84 views2 pages
    This document provides the instructions and questions for an intermediate macroeconomics exam. The exam consists of three questions. Question 1 has two parts asking students to (i) distinguish between crowding-out and crowding-in effects of fiscal policy and suggest measures for crowding-in, and (ii) analyze the short-run and long-run effects of various economic changes using IS-LM/AD-AS diagrams. Question 2 asks students to (a) derive IS and LM curves, (b) find equilibrium levels, (c) analyze the effects of increased government spending, (d) summarize the effects of monetary policy changes, and (e) consider policy mixes to decrease deficits without reducing output or investment. Question 3

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    This document provides the instructions and questions for an intermediate macroeconomics exam. The exam consists of three questions. Question 1 has two parts asking students to (i) distinguish between crowding-out and crowding-in effects of fiscal policy and suggest measures for crowding-in, and (ii) analyze the short-run and long-run effects of various economic changes using IS-LM/AD-AS diagrams. Question 2 asks students to (a) derive IS and LM curves, (b) find equilibrium levels, (c) analyze the effects of increased government spending, (d) summarize the effects of monetary policy changes, and (e) consider policy mixes to decrease deficits without reducing output or investment. Question 3

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    84 views2 pages

    Inter. Macro Assignment

    Uploaded by

    muyi kunle
    This document provides the instructions and questions for an intermediate macroeconomics exam. The exam consists of three questions. Question 1 has two parts asking students to (i) distinguish between crowding-out and crowding-in effects of fiscal policy and suggest measures for crowding-in, and (ii) analyze the short-run and long-run effects of various economic changes using IS-LM/AD-AS diagrams. Question 2 asks students to (a) derive IS and LM curves, (b) find equilibrium levels, (c) analyze the effects of increased government spending, (d) summarize the effects of monetary policy changes, and (e) consider policy mixes to decrease deficits without reducing output or investment. Question 3

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    COURSE TITLE: INTERMEDIATE MACROECONOMICS

    COURSE CODE: ECN 321


    INSTRUCTION: ANSWER TWO QUESTIONS (Question 1 is compulsory).
    Question One
    i. Distinguish between crowding-out and crowding-in effects and suggest fiscal policy
    measures that could result in crowding-in effect on private investment.
    ii. Using the IS-LM/AD-AS diagram, describe the short-run and long-run effects of the
    following on national income, interest rate, price level, consumption, investment and real
    money balances:
    a) An increase in taxes
    b) A house price boom
    c) A fall in corporate profit
    d) Expectation of a future increase in unemployment
    e) A programme of investment in new ATMs
    f) Financial deregulation leading to the abolition of reserve-asset ratios.
    g) A boom in stock market prices
    h) An increase in ATM charges (40 Marks)
    Question Two
    Md Ms
    Given C=400+ 0.5 Y d I =700−4000 i G=200 T =200 =0.5 Y −7500 i =500
    P P
    a) Derive the IS curve relation and the LM curve relation.
    b) Find the equilibrium level of Y, i, C and I.
    c) Suppose G increased by 500, find the values of Y, i, C and I.
    d) Summarise the effect of the fiscal expansionary policy in question (iii) by stating what
    happened to Y, i, C and I.
    e) Suppose money supply increases by 500, solve for Y, i, C and I.
    f) Summarise the effect of the expansionary monetary policy on Y, i, C and I.
    g) Suppose policy makers want to decrease the deficit, while guaranteeing that there will be
    no decrease in either the output or investment spending. Is there any policy mix that can
    achieve this goal? (20 Marks)

    Question Three
    Suppose that an economy could be characterized by the following structural equations:
    Y =C + I+ G+ X−M C=20+0.8 Y d Y d =Y −T T =10 G=10 I =20
    X =15 M =12
    a) What is the equilibrium level of income?
    b) Compute the balanced budget multiplier and explain its implication.
    c) Suppose G were increased by 10 and T were increased by 5, what would be the change in
    equilibrium income?
    d) Suppose G were raised by 15 and T also raised by 15, will there be any change in
    equilibrium income? Explain your answer.
    e) Suppose T = 10 + 0.15Y, what would equilibrium income be in this case? What is the
    multiplier?
    f) Suppose T = 10 + 0.15Y and M =12+0.75 Y what would equilibrium income be in this
    case? What is the multiplier? (20 Marks)

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