macroeconomics

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Uppgift 2.1Question 2 – Planned Aggregate Expenditure and short-run equilibrium output (10 points) Assume that the following apply for an open economy with a public sector: Autonomous consumption (C)= 500 Marginal propensity to consume c) = 0 .5 Planned investments (I) = 800 Marginal tax rate (t) = 0 .30 Government purchases of goods and services (G) = 500 Exports (EX) = 450 Marginal propensity to import (m) = 0 .15 Autonomous imports (IM) = 250 A) State the equation for the consumption function for this economy. (2p) Σ B) Calculate the specific equation that is used to determine PAE for this economy. (2p)Σ C). Calculate the short-run equilibrium output level. The COVID-19 pandemic influences many aspects of the economy. Assume that the epidemic has lead to the following changes: C=400 c=0.4 I=600, EEX=400, mm=0.1 IM=200. D) Calculate the new short-run equilibrium output level. By how many percent has output fallen due to the crisis? (2p) E) Suppose that the government wants to milden the effects of the crisis by changing government expenditure (G). Calculate the additional government expenditure that would be needed in order to reach the same equilibrium output level as in c)? (2p) National Saving (10 points) A. Table 1 below presents the value of some economic indicators before and after the outbreak of the COVID-19 pandemic. Use the data in column (1) and (2) to find national saving, private saving, public saving and the national saving rate before and after the outbreak of the virus, respectively. Fill in the empty entries in Table 2. (4p) Table 1 (1) Before COVID-19 2) After COVID-19 Household saving 800 900 Business saving 500 -100 Government purchases of goods and services 1000 1200 Government transfers and interest payments 875 1000 Tax collections 1925 1500 GDP 4500 4000 Table 2 (1) Before COVID-19 2) After COVID-19 Private saving Public saving National saving National saving rate Uppgift 5.1Question 5 – Exchange rates (9 points) The demand and supply of euros (€) in the foreign exchange market are given by the following functions: In terms of US dollars ($): Demand = 16,500 – 3,000e1 Supply = 10,000 + 2,000e1 In terms of Swedish kronor (SEK): Demand = 30,000 – 2,000e2 Supply = 3,900 + 1,000e2 where the nominal exchange rates are expressed as foreign currency per euro. A) By help of the functions above, fill in the blanks (1-4) in the table below. (3p) Country Foreign currency per euro Euro per foreign currency USA (dollars) (1) (3) Sweden (SEK) (2) (4) Country Foreign currency per euro Euro per foreign currency USA (dollars) Sweden (SEK) B) Based on your calculations, what is the nominal dollar/SEK (dollar per SEK) exchange rate? (2p) C) In Sweden a white BILLY bookcase (80*28*202 cm) at IKEA costs 395 SEK. The equivalent bookcase in the US is sold at $59.99. In which country is BILLY cheaper? US Sweden (1p) D) Calculate the real exchange rate for the BILLY bookcase, assuming that the SEK is the domestic currency. Explain what the calculated real exchange rate means. (3p) Question 4 – Inflation and Indexation (10 points) The table below shows the monthly CPI for the Swedish economy, and the yearly average, from year 2014 to 2020, using 1980 = 100 as the base year for the CPI. Year Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec Annual Average 2019 328.6 331.0 331.8 334.1 335.0 334.5 335.8 334.4 336.0 336.0 336.4 337.7 334.3 2018 322.5 324.9 325.8 327.1 327.9 328.6 330.3 329.6 331.1 330.7 330.4 331.9 328.4 2017 317.5 319.7 319.7 321.5 321.7 322.0 323.7 323.2 331.1 323.4 324.0 325.2 322.1 2016 313.1 314.1 315.7 315.6 316.2 316.5 316.7 316.4 316.9 318.0 318.1 319.7 316.4 2015 310.8 312.9 313.2 313.2 314.2 313.3 313.4 312.8 314.1 314.3 313.8 314.2 313.4 2015 311.4 312.7 312.7 313.9 314.1 314.7 313.7 312.8 313.9 313.9 313.6 314.1 313.5 Use the information provided to answer the following questions: A) Calculate the annual average rate of inflation for 2015 ,2016 , 2017 , 2018 and 2019 . Round to 1 decimal place (2.5p) B) Assume that the annual average rate of inflation in 2019 continues for 2020. What would be the yearly average CPI in 2020? Round to 1 decimal place (1p) Now assume that a worker in the private sector earned 75 000 SEK monthly in June 2014, and she earned 80 000 SEK monthly in June 2019. C) In terms of purchasing power of the wage, is the worker student better or worse off in June 2019? Provide an answer using each of the following methods: i.Compare values of wages, using June 2014 as the base month-year (1.5p) ii.Compare values of wages, using June 2019 as the base month-year (1.5p) iii.Compare values of wages, using 1980 (=100) as the base year (1.5p) D) How much did the wage grow from June 2014 to June 2019 in nominal terms? What was the inflation rate from June 2014 to June 2019? How does this explain your previous answer in c)? (2p)

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