Question a) Consider that the Ghanaian economy is a Small and close, which is characterised by the following. AD=C+I+G+NX C=a+bY* Y*=disposalincome T=T 0 I=I 0 G=G0 Md/P=Ld(Y,i) Ms=money supply, which is given. AD=Aggregate demand, C=consumption, G=Government expenditure, T=Tax, P= Price level, I=Investment, NX=Net exports i)Suppose the policy change is rather an increase in real money supply not a decrease in government spending. What is the effect of this policy on consumption in the Short Run? (Provide a brief explanation).
a) Consider that the Ghanaian economy is a Small and close, which is
characterised by the following.
AD=C+I+G+NX
C=a+bY*
Y*=disposalincome
T=T 0
I=I 0
G=G0
Md/P=Ld(Y,i)
Ms=money supply, which is given.
AD=Aggregate demand, C=consumption, G=Government expenditure, T=Tax, P= Price level, I=Investment, NX=Net exports
i)Suppose the policy change is rather an increase in real money supply not a decrease in government spending. What is the effect of this policy on consumption in the Short Run? (Provide a brief explanation).
ii)If the government of Ghana decided to run a balance budget, provide an expression for the balance budget multiplier.
iii)What is the effect of the balance budget policy in (e) above on out put (y)?
iv)Dorcas is given Ghs10,000.00 to pay for her school fees next semester. She
decided to deposit Ghs600.00 in her ADB account and the rest in a different
bank. Assume that the
other bank,determinethe amount of supply in the economy.
v)How would your answer change if she decides to put all the money in the other
bank?
Step by step
Solved in 4 steps with 1 images
