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What are the two (2) assumptions when GDP increasing over the years?
Explain the multiplier intuitively. Why is it that an increase in planned
investment of 100 pesos raises equilibrium output by more than 100
pesos?
Illustrate the possible effects of the following policy measures on the AS and AD curves:
(a) a cut in income tax rates
(b) a rise in government expenditure
(c) a decrease in the cost of borrowing by firms and households
(d) a fall in the value of the domestic currency on the foreign exchange market
(e) a rise in consumer confidence.

the South african economy expanded on annualised 2.5percent on quarter in the three months of June 2017 ending 2 quarters of contraction and beating the market expectations of a 2.1 percent rise . It is the highest growth rate in the year with agriculture, forestry and fishing making the largest upward contribution use the AD -AS model to illustrate the effect of such growth on the general price level and the aggregate output of the South African economy


2. Adam is the owner of a small grocery store in a busy section of Boulder, Colorado. Adam’s annual revenue is $200,000 and his total explicit cost (Adam pays himself an annual salary of $30,000) is $180,000 per year. A supermarket chain wants to hire Adam as its general manager for $60,000 per year.

a. What is the opportunity cost to Adam of owning and managing the grocery store?
b. What is Adam’s accounting profit?

c. What is Adam’s economic profit
Consider a malthasian economy which is initially at a steady state consumption percapita of capital and labour per capital of /*.A shock hits this economy changing the steady state level of land per capital
Which one of the following statements is FALSE? (2)
(a) There are four broad groups of decision‐making units in the economy:
households, firms, government and the foreign sector;
(b) Savings are an important injection into the circular flow of income and
spending in the economy;
(c) Taxes are a leakage or withdrawal from the flow of income and spending in
the economy;
(d) Spending by households on consumer goods and services is called
consumption spending.
2) Graphically illustrate the effects of business investment on aggregate demand. Would you expect it to have a multiplier effect? Why or why not? 3 marks

3) Malaysia is the one of the world’s most famous producer of boutique. The global demand for high quality boutique has increases and at the same time Malaysia’s central bank, Bank Negara, has increases the interest rate through contractionary monetary policy. In the foreign exchange market for Malaysian Ringgit, what happens to


a) The demand for Malaysian Ringgit?

b) The supply of Malaysian Ringgit?

c) The quantity of Malaysian Ringgit demanded?


1) How does a change in the quantity of money change the interest rate in the short run?


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