1) If the government wants to reduce unemployment what are some ways it should change spending and taxes?2) Define net taxes.3) Define the budget deficit.4) Assume the following behavioral equations for a macroeconomy:C = 100 + 0.9Yd, I = 50, T = 100 and G = 40. Calculate the equilibrium level of output.5) In a closed economy with a public sector prove that S + T = I + G.6) Suppose that the MPS = 0.2 and the government is interested in raising the level of output in the economy by$100 billion. Calculate how much the government would have to spend to achieve this objective.7) Define the tax multiplier and give the algebraic expression.8) Assume that the government spending multiplier is equal to 4. Calculate the tax multiplier from thisinformation.9) Calculate how much output would expand by if the government increased spending by $500 billion and financedthis spending by increasing lump-sum taxes by the same amount.10)Given the above model for an economyC = 100 + 0.8YdG = 800T = 500I = 200a) Calculate the level of savings when the economy is in equilibrium.b) Find government spending multiplier.c) Find the new equilibrium level of output if investment is increased by 100 (ΔI = 100).d) Find Tax multiplier.e) Find the new level of output if the lump-sum tax is increased by 100 (ΔT = 100).f) Find the new level of output if the government spending is increased by 100 and this governmentexpenditure increase is financed by the same amount of increase in lump-sum taxes (ΔG = ΔT = 100).11)According to table below (all figures are in billions of dollars)Currency held outside banks $ 800Demand Deposits 1000Traveler's Checks 100Other checkable deposits 200Savings accounts 300Money market accounts 100Other near monies 200a) What is the value of M1?b) What is the value of M2 ?12)Assume the banking system has $100 billion in demand deposits and $10 billion in reserves. In addition, assumethat the required reserve ratio is 5%. Answer the following questions:a) How much excess reserves are in this system?b) What is the value of the money multiplier?c) What is the maximum amount of change in demand deposit creation that could take place if the bankingsystem lent out all of its excess reserves.13)Summarize the effect of an open market purchase of securities by the TCMB.14)Summarize the effect of an open market sale of securities by the TCMB.15)By using graphs, show and explain each of the following events as either leading to an increase or a decrease inthe equilibrium interest rate?a) A decrease in the price levelb) An increase in the discount ratec) A decrease in the level of aggregate outputd) A sale of government securities by the TCMB16)Explain the "crowding-out effect."Ege University Introduction to MacroecononmicsDepartment of Business Tutorial IIIAssist. Prof. Dr. Barış GÖK 2015 Spring17)Show and explain how an expansionary fiscal policy can cause crowding-out effect by using aggregateexpenditure and aggregate output curves.18)What action could the TCMB take to reduce the crowding-out effect of an expansionary fiscal policy?19)By using graphs, show and explain the effects of an expansionary fiscal policy on the goods market by taking thelink between two markets into account.20)Using the short-hand symbols G, Y, Md, r and I to demonstrate the effects of an expansionary fiscal policy.21)Using the short-hand symbols Ms, r, I, Y, and Md to demonstrate the effects of an expansionary monetarypolicy.22)Using short-hand symbols, explain the effects of a contractionary fiscal policy.23)Using short-hand symbols, explain the effects of a contractionary monetary policy.24)By using graphs, show and explain how an increase in money supply can affect the goods market by taking thelink between two markets into account.25)Show and explain the derivation of AD curve by taking the link between the money market and the goods marketinto account.26)Show and explain the effects of an increase in aggregate demand in the long-run and short-run by using AD–AScurves.27)Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of moneyincreases and the increase is not anticipated; that is, the price level is not expected to change.28)By using aggregate demand (AD) and aggregate supply (AS) curves, show and explain the effects of ananticipated increase in money supply on macroeconomic equilibrium according to Rational ExpectationsHypothesis.
1) If the government wants to reduce
2) Define net taxes.
3) Define the budget deficit.
4) Assume the following behavioral equations for a macroeconomy:
C = 100 + 0.9Yd, I = 50, T = 100 and G = 40. Calculate the equilibrium level of output.
5) In a closed economy with a public sector prove that S + T = I + G.
6) Suppose that the MPS = 0.2 and the government is interested in raising the level of output in the economy by
$100 billion. Calculate how much the government would have to spend to achieve this objective.
7) Define the tax multiplier and give the algebraic expression.
8) Assume that the government spending multiplier is equal to 4. Calculate the tax multiplier from this
information.
9) Calculate how much output would expand by if the government increased spending by $500 billion and financed
this spending by increasing lump-sum taxes by the same amount.
10)Given the above model for an economy
C = 100 + 0.8Yd
G = 800
T = 500
I = 200
a) Calculate the level of savings when the economy is in equilibrium.
b) Find government spending multiplier.
c) Find the new equilibrium level of output if investment is increased by 100 (ΔI = 100).
d) Find Tax multiplier.
e) Find the new level of output if the lump-sum tax is increased by 100 (ΔT = 100).
f) Find the new level of output if the government spending is increased by 100 and this government
expenditure increase is financed by the same amount of increase in lump-sum taxes (ΔG = ΔT = 100).
11)According to table below (all figures are in billions of dollars)
Currency held outside banks $ 800
Demand Deposits 1000
Traveler's Checks 100
Other checkable deposits 200
Savings accounts 300
Other near monies 200
a) What is the value of M1?
b) What is the value of M2 ?
12)Assume the banking system has $100 billion in demand deposits and $10 billion in reserves. In addition, assume
that the
a) How much
b) What is the value of the money multiplier?
c) What is the maximum amount of change in demand deposit creation that could take place if the banking
system lent out all of its excess reserves.
13)Summarize the effect of an open market purchase of securities by the TCMB.
14)Summarize the effect of an open market sale of securities by the TCMB.
15)By using graphs, show and explain each of the following events as either leading to an increase or a decrease in
the equilibrium interest rate?
a) A decrease in the price level
b) An increase in the discount rate
c) A decrease in the level of
d) A sale of government securities by the TCMB
16)Explain the "crowding-out effect."
Ege University Introduction to Macroecononmics
Department of Business Tutorial III
Assist. Prof. Dr. Barış GÖK 2015 Spring
17)Show and explain how an expansionary fiscal policy can cause crowding-out effect by using aggregate
expenditure and aggregate output curves.
18)What action could the TCMB take to reduce the crowding-out effect of an expansionary fiscal policy?
19)By using graphs, show and explain the effects of an expansionary fiscal policy on the goods market by taking the
link between two markets into account.
20)Using the short-hand symbols G, Y, Md, r and I to demonstrate the effects of an expansionary fiscal policy.
21)Using the short-hand symbols Ms, r, I, Y, and Md to demonstrate the effects of an expansionary
policy
22)Using short-hand symbols, explain the effects of a contractionary fiscal policy.
23)Using short-hand symbols, explain the effects of a contractionary monetary policy.
24)By using graphs, show and explain how an increase in money supply can affect the goods market by taking the
link between two markets into account.
25)Show and explain the derivation of AD curve by taking the link between the money market and the goods market
into account.
26)Show and explain the effects of an increase in aggregate demand in the long-run and short-run by using AD–AS
curves.
27)Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of money
increases and the increase is not anticipated; that is, the price level is not expected to change.
28)By using aggregate demand (AD) and
anticipated increase in money supply on
Hypothesis.
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Assume the following behavioral equations for a macroeconomy:
C = 100 + 0.9Yd, I = 50, T = 100 and G = 40. Calculate the equilibrium level of output.
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