Principles of Macroeconomics
Question one particular (10 marks)
(a) The relative scarcity of resources makes the operation of any economic climate a matter of choosing between alternatives. вЂќ Clarify.
The world has limited resources and us, as people have infinite wants. Therefore , we must regularly make decisions to choose what we would rather buy or develop and whatever we must quit in its result. This includes job and period. For example , learning for a great exam overdue at night gives you more time to retain know-how but could limit the sleep which could lead to a poor exam tag.
(b) The production possibilities table beneath shows the hypothetical romantic relationship between the creation of meals and clothes in an economy. a. What is the marginal opportunity cost of producing the other unit of clothing? 18-13= 5
The marginal prospect cost of producing the second product of clothing is 5 units of foodstuff. b. What is the total opportunity cost of making two products of garments? 22-13= on the lookout for
The total opportunity cost of generating two models of clothes are 9 devices of foodstuff. c. What is the little opportunity expense of producing the third unit of clothing? 13-7= 6
The marginal chance cost of generating the third product of clothing is 6 models of meals. d. Precisely what is the total chance cost of creating three products of clothing? 22-7= 12-15
The total prospect cost of creating three products of clothing is 15 products of foodstuff.
(c) Explain the alterations in the production possibilities curves in each of the subsequent situations intended for the Canadian economy. a. the economy goes from full employment into a deep downturn The production choices curve ways to the remaining. This displays lower creation possibilities. w. the economy makes great strides in eliminating discrimination The production opportunities curve ways to the right. Simply by increasing the number of people all of us hire we have more staff able to generate more. c. the end in the Cold Battle leads to cuts in armed forces spending The availability possibilities shape would go on to the right. This could lead to even more government spending on resources that will increase worker's abilities to work. For instance , higher minimum wage, better public transportation. g. the government significantly increases spending for health insurance and education In the short term this would move the production options curve left because there can be less spending on increasing work. Later on this will move the curve to the right though because a even more educated work force increases development possibilities.
Question two (10 marks)
(a) Suppose you invested $50 at 4%. How much money might you have at the end of years 1, 2, 5, twelve, 20, 55, and 90 assuming you left the money in the traditional bank to gain compound fascination? Year you: 50*(1+. 04)= $52
12 months 2: 50*(1+. 04)^2= $54. 08
Year 5: 50*(1+. 04)^5=$60. 83
Year twelve: 50*(1+. 04)^10=$74. 01
12 months 20: 50*(1+. 04)^20=$109. 56
Year 50: 50*(1+. 04)^50=$355. 33
Year 100: 50*(1+. 04)^100=$2525. twenty-five
(b) A friend offers you the subsequent deal: loan her $5, 000 today and she'll pay you back again $6, 2 hundred in 3 years. If the greatest interest rate you can generate is 6. 8%, what would you perform? 5000*(1+. 068)^3=$6090. 93
6200-6090. 93=$109. '07
I would lend the $5000 to my friend because We would make $109. 07 even more by choosing that option.
(c) Suppose you have three investment opportunities A, B, and C. Alternative A includes a ОІ=0. thirty-five, option B has ОІ=1. 65, and option C has ОІ=0. 98. Order these via least risky to most dangerous. Describe what ОІ=1. sixty five means. Least Risky: ОІ=0. 35
Medium Risk: ОІ=0. 98
Most Risky: ОІ=1. 65
ОІ=1. 65 signifies that an asset provides 1 . 65 times even more non-diversifiable risk as the market portfolio.
Question a few (10 marks)
(a) Respond to this question: " Producing capital goods does take time, so how may that be a more efficient...
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