macro perfect kaa some examplwes

Question 1

the economic effects of depreciation

Answer 1

the economy is initially in equilibrium where the average price level p and real output is Y. Due to a deprecation of the pound, export prices fall and import prices rise. As a result demand for uk exports increases shifting AD right to AD1 as exports are a component of AD. This creates a new equilibrium with an increased real output.

This may also create a multiplier effect where the blue of the intial injection from exports is smaller than the final increase in total spending. This is because as exports incomes rise, exports increase production and hire workers or raise wage rates.

As workers income increase consumption will rise further shifting AD1 to AD2.

This depends on the value of the marginal propensity to consume the higher this value the greater the value of the multiplier

the economy is finally in equilibrium where yf real output is produced at price level p. The deprecatopm in the currency has resulted in export led growth and demand pull inflation

Question 2

The lorenz curve less inequality kaa

Answer 2

The income distribution of the economy is initially shown by LC. However when transfer payments are introduced income is taken form the richer sectors of society taxpayers and paid to the poorer sectors of society those without any income

Hence as the poor now earn a greater proportion if income the curve moves closer to the line of equality to LC1

AS income is now distributed more equally the uks gini coffin will decrease

Question 3

The lorenz curve becomes more inequality

Answer 3

Macro point inequality increases
Gini coreficent is increases
LC - inquality low
Top and bottom quartile have a gap in income is relatively small
Gini cowfinint is low A divided by A+B+C
Shifts towards lc2 as tax is regressive disable income falls
Disable income a larger proportionally later for bottom quintile
Gap widens therefore income inequality has increased
So gini rises by
A+B divided by A+B+C