Macroeconomics coursework Example | Topics and Well Written Essays - 1500 words

Macroeconomics - Coursework Example(6 marks) c)First-order conditions Uc(C , l) l = 0 Ul(C , l) lzFN(K , h l) = 0 zF(K , h l) G C = 0 When the first two conditions arcombined Hence, in sense of balance MRTl,C = MRSl,C = w Which states that the Pareto optimum is the point where the indifference curve is tangent to the PPF? d) What happens to consumption, wages and verbotenput as G increases? (6 marks) After the increase in g = G/Y, the model can be able to predict a decrease in (c, w), increase in (Y,N, r), spending of Private consumption is crowded out by government spending increase. Output increases but welfare loss as both c, l fall.T (Besada and, Miras (2002) Question 2) a) Solve for labor supply as a function of t. (6 marks) Since w = z, we obtain the system Ul(C , l) z(1 t)Uc(C , l) = 0 C + G z(h l) = 0 Totally differentiating these gives Ucl z(1 t)UccdC + Ull z(1 t)Ucldl zUcdt = 0 dC + zdl + dG = 0 We had 2 equations from the previous sections C = w(1 t)(h l ) (1) C = z(h l) G (2) By substitution, we will have G = zt(h l) It indicates the total spending by the government that equals total tax revenue. b) resume the Laffer curve for values of t from 0 to 1. (4 marks) Laffer curve c) What is the equation for t that maximizes tax revenue G? Either graphically or by another(prenominal) means, find this value numerically. (6 marks) The equation is as below G = tzh l(t) Basing on the curve above, the tax revenue is zero if t = 0 and t = 1 Therefore the numerical value is 0.5 Government maximizes tax revenue at t = t*. REV = REV* d) If G=0.2, find (either graphically or otherwise) the two values of l and t that satisfy this requirement. (4 marks) If G=2 then l and t is as below Question 3) Calculate the % year-to-year return rates in each serial publication, and graph them using a time series plot and a scatter plot (4 marks) Scatter plot time series (b) Are they positively or negatively correlated? (3 marks) They are positively correl ated c) Does angiotensin converting enzyme lead the other? (3 marks) Basing on the graphs it is evident that one leads to the other d) Do the same using quarterly GDP and quarterly M2. Is there any consistency between M2-IIP and M2-GDP? Explain. (10 marks) Scatter plot Time series Basing on the graphs, there is no consistency between the two. This is because there is no correlation and one doesnt lead to the other and the range or detachment between one value is to small. Question 4) (a) Draw the consumers budget constraint, and show the optimal choice of consumption and leisure. Is it manageable that the consumer may only deal an income of X? (8 marks) Consumer budget constraint The equality above holds at point H where the curve of indifference is tangent to the budget constraint and it is not possible for the consumer to choose an income of X b) What happens when the threshold value X decreases, explaining in terms of income and substitution effects consider the cases of (i) someone whose income was initially below X and (ii) someone whose income was initially above X. (12 marks) When the value of X threshold decrease the impact is for example marginal substitution rate diminishes over time due to there is a diminishing marginal utility principle (Becker, 1965). Question 5) (a) Show how an increase in such government spending