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May 17, 2023
  1. Question 1

    How will the following situations affect the investment demand curve? Draw a diagram for each to illustrate your answer.

    • A new type of manufacturing machine has been developed that is not only cheaper but also more energy efficient.
    • To reduce the fiscal deficit, the government increases corporate taxes.
    • Unplanned inventories rise to new highs in the economy.

    Question 2

    The data in the first two columns below are for a private closed economy.

    ECO211 Macroeconomics

    • What is the equilibrium GDP for the private closed economy?
    • Including the international trade figures for exports and imports, calculating net exports, and determining the equilibrium GDP for a private open economy.
    • What is the size of the multiplier in this economy?
    • What will happen to equilibrium GDP if exports were $10 billion larger at each level of GDP?
    • What will happen to equilibrium GDP if exports remained at $15 billion, but imports rose to $15 billion?

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