Essays

Question 1

spiced and the four macroeconomic objectives

Answer 1

– Increasing exchange rate, increases exports and decrease imports

– Demand for exports should fall and demand for imports should rise

– Export revenue, decreases and import expenditure may increase

– Net exports would decrease reducing trade surplus

– Leading to decrease in balance of payments

– aggregate demand shifts left as net export, the component of aggregate demand

– Leading to fall in demand, pull inflation from pl1-pl2

– Fall in employment and real GDP y1-y2

Question 2

WPIDEC and the four macroeconomic objectives

Answer 2

– Decrease in exchange rate decreases exports and increases imports

– Demand for exports should rise and demand for imports should fall

– Export revenue increases and import expenditure decreases

– Net exports would increase increase in a trade surplus

– Leading to an increase in the balance of payments

– Aggregate demand would shift rightwards AD1-AD2 as net export is a component of aggregate demand

– Leading to a rise in demand, pull inflation pl1-pl2

– And a fall in employment and a real GDP y1-y2

Question 3

A change in the size of a trade deficit

Answer 3

– If a trade deficit decreases in size, it means that has either been a rise in value of export revenue or fall in the value of imports expenditure

– This leads to a rise in the value of net exports

– This leads to an increase in aggregate demand AD2-AD3

– As net exporter, the component of aggregate demand

– The size of a positive output gap would increase further

– As output increases furtyrr away from the monetarist, long run output, y2-y3

No

Question 4

A change in the size of a trade surplus

Answer 4

– If trade surplus decreases in size it means that has either been a fall in the value of export revenue arise in the value of imports expenditure

– this leads to a fall in the value of net exports

– This lead to a decrease in aggregate demand AD1-AD2

– As net export, the component of aggregate demand

– The size of a negative output gap would increase

– As I will put decrease is further away from Long run output y1-y2

The

Question 5

Fiscal policy

Answer 5

– Fiscal policy is undertaken with either a decrease in government spending or a rise in the taxation, which increases MPT

– If tax increases incomes fall, which leads to a fall in the components of aggregate demand

– If if corporation tax increases, retained profits fall, which leads to a fall in investment

– This leads to a fall in aggregate demand AD1-AD2

– Leads to an increase in balance of payments

– If lower incomes lead to lower demand for imports

– There may also be a fall in demand, pull inflation pl1-pl2

– Given the fall in real GDP and rising unemployment, a budget surplus exists, if the economy is that full capacity

– As low inflation is a car, macroeconomic objectives in the UK 2% plus or -1%