Essay on Eco Question Pool

2135 Words Mar 17th, 2014 9 Pages
ECON1102 MACROECONOMICS 1 Session 2, 2012 Tutorial Test (Week 17-21 September) INSTRUCTIONS 1. Tutorial tests will be constructed from the following pool of short-answer questions. 2. Each Tutorial test will be comprised of a sufficient number of short-answer questions to add-up to a total of 20 marks. 3. The marks for each question provide an indication of how much is required to answer the question. 4. Tutorial tests may contain questions on different topics. 5. The set of short-answer questions used will vary across Tutorial tests. 6. Where questions have numerical parts, the actual numbers used will be changed for the Tutorial tests. 7. You will have 30 minutes to complete your Tutorial test. 8. A non-programmable calculator may be …show more content…
(5 marks) Identify and briefly explain the various economic costs associated with inflation. (5 marks) Explain the difference between the nominal interest rate and the real interest rate. Which rate is most relevant to decisions to borrow and lend. Briefly explain. (2 marks) Explain the Fisher Effect. (2 marks)

Explain the various factors that will influence a firm’s decision to purchase a new piece of capital equipment. What condition would need to be satisfied for the firm to be willing to invest in the new capital? (5 marks) Explain why the labour demand curve for an individual firm is downward sloping and indicate the main factors that cause the curve to shift. Will the same factors that cause a shift in an individual firm’s labour demand curve also shift the aggregate demand curve for labour? Explain. (5 marks) Briefly explain the following three motives for saving:  life-cycle  precautionary  bequest Indicate what effect the widespread availability of home equity loans might have on each form of saving. {Note: A home equity loan allows households to borrow (usually at a relatively low interest rate) against the equity they have in their home. (Equity refers to the difference between the market value of the home and any mortgage debt.)} (5 marks) What factors might cause households to under-save relative to some rationally optimal level? (2 marks) Consider the following model for

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