Macroeconomics assignment.

  

1. 
Answer the
following questions:
a) 
Write down the
national account identify for a closed economy. Then, show the identity between
national savings (i.e. the sum of private savings and government savings) and
investment. You must show all of the steps. (2 marks)
b)  Write down the national
account identity for an open economy. Again, show the identity between
national savings (i.e. the sum of private savings and government savings) and
investment. Show all of your steps. (2
marks)
c) 
Based on the
saving and investment relationship in the closed economy in Part a), explain
how an increase in government purchases (G) can affect growth in output per
worker. We assume that the taxes that the government collects remain unchanged.
(2 marks)

1. 
Analyse the effects of the following
events in the
loanable fund market diagram where we have (real) interest rate (r) on the
vertical axis and the quantity of loanable fund (Q) on the horizontal axis. Please
ensure to explain what happens to private saving, private investment spending,
and (real) interest rate, and demonstrate it changing a figure below.
a) 
An increase in government
purchases (2 marks).
Answer here (Tips: to create new lines, simply copy
the existing curves and move to the new location)

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a) 
Australian
business becomes very optimistic about the future course of the economy and
this increases the prospect of their profitability at any given (real) interest
rate. Assume the government budget balance is zero. (2 marks)

1.  The level of government debt is a growing
concern for the current Australian Treasurer who has the responsibility of
managing the government budget. Summarise the key arguments on the debate around
Australian government deficit. Your summary must address the following;
·What is the major concern of running government
deficits?
·What is the economic reasoning to have a balanced
budget? and
·When might a budget deficit/surplus be OK?
Conclude by briefly discussing what policies you would suggest to the
Treasurer in order to balance the budget and why. The summary should be at
least half a page in length (3
marks). 
Need assignment by 4pm Australian EST 22nd of April.
macro_economics_assignment.docx

Unformatted Attachment Preview

1. Analyse the effects of the following events in the loanable fund market diagram
where we have (real) interest rate (r) on the vertical axis and the quantity of loanable
fund (Q) on the horizontal axis. Please ensure to explain what happens to private
saving, private investment spending, and (real) interest rate, and demonstrate it
changing a figure below.
a) An increase in government purchases (2 marks).
Answer here (Tips: to create new lines, simply copy the existing curves and move to the
new location)
Real Interest
Rate (r)
r1
Supply1
E1
Demand1
Q1
Quantity of Loanable
Funds (Q)
b) Australian business becomes very optimistic about the future course of the
economy and this increases the prospect of their profitability at any given (real)
interest rate. Assume the government budget balance is zero. (2 marks)
Answer here (Tips: to create new lines, simply copy the existing curves and move to the
new location)
Real Interest
Rate (r)
r1
Supply1
E1
Demand1
Q1
Quantity of Loanable
Funds (Q)
c) A decrease in the income tax rate (2 marks)
Answer here (Tips: to create new lines, simply copy the existing curves and move to the
new location)
Real Interest
Rate (r)
r1
Supply1
E1
Demand1
Q1
Quantity of Loanable
Funds (Q)
2. Answer the following questions:
a) Write down the national account identify for a closed economy. Then, show the
identity between national savings (i.e. the sum of private savings and government
savings) and investment. You must show all of the steps. (2 marks)
b) Write down the national account identity for an open economy. Again, show the
identity between national savings (i.e. the sum of private savings and government
savings) and investment. Show all of your steps. (2 marks)
c) Based on the saving and investment relationship in the closed economy in Part a),
explain how an increase in government purchases (G) can affect growth in output
per worker. We assume that the taxes that the government collects remain
unchanged. (2 marks)
3. The level of government debt is a growing concern for the current Australian
Treasurer who has the responsibility of managing the government budget.
Summarise the key arguments on the debate around Australian government
deficit. Your summary must address the following;
 What
is the major concern of running government deficits?
 What is the economic reasoning to have a balanced budget? and
 When might a budget deficit/surplus be OK?
Conclude by briefly discussing what policies you would suggest to the
Treasurer in order to balance the budget and why. The summary should be at
least half a page in length (3 marks).

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