"An economy is dynamically inefficient if its citizens are short - sighted and save too little. Savings should be stimulated by the policy maker in a dynamically inefficient economy." Explain and evaluate these propositions.
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- Explain the difference between saving andinvestment as defined by a macroeconomist. Whichof the following situations represent investment andwhich represent saving? Explain.a. Your family takes out a mortgage and buys a newhouse.b. You use your $200 paycheck to buy stock in AT&T.c. Your roommate earns $100 and deposits it in hisaccount at a bank.d. You borrow $1,000 from a bank to buy a car to usein your pizza delivery business.2. is it possible for total saving to fall when people beome more thirfty?A good example of a policy to increase an economy's saving rate is_ a. to reduce poverty O b. to reduce interest rates O c. to increase government spending © d. to increase sales taxes e. to increase the economic growth rate
- hich theory of consumption best explains the consumption behavior of consumers of our economy? Question No: 02 [Marks: 10] If the State Bank started printing large quantities of Pakistani Rupees (Rs), what would happen to the number of Pakistani Rupees a dollar could buy? Why? Question No: 03 [Marks: 10] Deseribe the difference batuuean foreian diract investmet and foraion nortfolie invastment Who is mora likelu to2) The below five graphs show the development of key macroeconomic variables over the scope of three years in a certain country. Use them to draw an IS-LM-PC graph that captures the development in this country. Explain carefully what has happened. G Y t 3) China currently (2016) has a household saving rate of about 36 %. It has never been below 27 % in the last 30 years. What role do you think this high saving rate has for China's economic success? It has been argued that the low standard of living in many less developed countries depend on their poor institutions. Explain carefully what kind of "institutions" this argument refers to. 4) 5) The Swedish Fiscal Policy Council discusses public debt policy in a low interest environment in their latest report. The argue that "there are strong arguments in favour of low public debt despite low interest rates. For private operators, it may be rational to increase debt in a low interest rate climate, but this is not necessarily the case for…In the Mid-2000's, Spain had a huge housing boom and they also had the highest inflation rate in Europe. This is an example of O How overall spending can sometimes get out of line with the economy's productive capacity. OOpportunity costs A scarcity issue in housing as land is a limited resource. Government polices can change consumption.
- The catch-up effect refers to the idea that Select one: a. Rich countries aid relatively poor countries so as to catch them up O b. None of the answers are correct Oc. Saving will always catch-up with investment spending O d. It is easier for a country to grow fast if it starts out relatively poor O e. If investment spending is low, increased saving will help investment to catch-upBecause of scarcity, people are more likely to do what? squander resources increase the profit margin use resources wisely The MOST important factor affecting consumer spending is O the level of current consumer debt O the amount of assets held by consumers such as homes, cars, stocks, or bonds the expectations of consumers of what the economy will be in the future © the level of current consumer income1. a. Explain consumption and saving function by using numerical example and diagram.
- The long run macroeconomic performance of an economy can be reflectedfrom the changes of her major macroeconomic indicators. With appropriateinterpretations of the changes to these indicators, one can identify the inherentstructural features of an economy, and hence, identify her strengths andweaknesses. In about 250 words, write a short essay on ONE economy from the list below:i. Singapore;ii. The United Kingdom;iii. The United States.In your essay, describe the changes of major macroeconomic indicators fromthe last decade. Using them to illustrate major structural features of the choseneconomy. Based on the above, identify ONE inherent problem implied bythese structural features that might limit her macroeconomic performance inthe long run. Suggest ONE practical government policy in dealing with thisinherent problem.Explain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent investment and which represent saving? Explain.a. Your family takes out a mortgage and buys a new house.You use your $200 paycheck to buy stock in Africel.Your roommate earns $100 and deposits it in his account at a bank.You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.The interest rate is 7 percent. Use the concept of present value to compare $200 to be received in 10 years and $300 to be received in 20 years.A company has an investment project that would cost $10 million today and yield a payoff of $15 million in 4 years.Should the firm undertake the project if the interest rate is 11 percent? 10 percent? 9 percent? 8 percent?Can you figure out the exact cutoff for the interest rate between profitability and nonprofitability?Explain how does adecrease in the current income y affect the consumer’s consumption-saving decision. In particular,explain: 1) How will current consumption c, future consumption c′, and savings s change; 2) Arethere any substitution effect or income effect. Make sure you draw two figures, one for the borrowersand one for the lenders
