Two Macro Economics Writing/Short answer questions

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Question: 1. Please answer following parts in this question. (30 marks)
a)
What is the paradox of thrift and fallacy of composition? (10 marks)
b) Use the Keynesian cross to illustrate the impact of the paradox of thrift on
output (remember that c1 + s1 = 1, marginal propensity to consume+ marginal
propensity to save=1) and show how a rise in S1can reduce output. (10 marks)
c)
How can a government support the economy? Discuss the potential policy
options, representing them in a labelled diagram (10 marks)
Question: 2. Please answer following parts in this question. (30 marks)
a)
Draw the equilibrium of unemployment using WS-PS model, anddiscuss
the bargaining gap. (10 marks)
b) Suppose that after Brexit, the government adopts policies that makeit difficult
for European firms to enter the UK market. Assume that the level of
employment and the labour supply remains constant. Doyou think this led to
inflation or deflation? Discuss the mechanism by which inflation or deflation
are created. (10 marks)
c)
Assume now you are working for the Bank of England and as part ofyour job
you have to monitor inflation and deflation and recommend policy
alternatives, what policy could be best to stabilise the economy? (10 marks)
Each sub question for about 200 words, totaling of 1200+ words total.
It is macro economic questions. Need to have concepts of economics.

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Explanation & Answer:

1200 Words

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