Q:51

a)
The business cycle, also referred to as the economic cycle or the business cycle, is the
fluctuation of the long-term growth rate of the gross domestic product (GDP). The length of a
business cycle is the time span comprising a single boom and series contraction .
b)
The portion of overall unemployment that results directly from cycles of economic upturn and
downturn is cyclical unemployment. In recessions, unemployment usually increases and
decreases during economic growth.
c)
Open market operations (OMO) refer to when the Federal Reserve mostly purchases and sells
U.S. To control the availability of money that is on deposit in U.S. banks, treasury securities on
the open market are also available for loaning out to companies and consumers.

d)

Automatic stabilisers are ongoing government policies that automatically change tax rates
and transfer payments in a way that is structured to stabilise business cycle sales, demand,
and business expenditure.
e)

In a floating exchange rate system, currency depreciation is a decrease in a currency's value. Factors
such as economic fundamentals, interest rate differentials, political uncertainty, or risk aversion
among investors can cause currency depreciation.

Q:55

A)

Y = real GDP

C = consumption

I = investment

M = import

G = government spending

Y= C+I+G+X–M

Y = 250 + 350 +100 + ( 60 – 0.15y)

Y = 700 + ( 60 -0.15y)
B)
Slop of AE
Marginal propensity to consume – marginal input propensity
= 0.75 – 0.15
= 0.60
C)
Multiplier
Multiplier = 1/1-(b – r)
Where b = marginal pro propensity to consume (0.75)
R = marginal propensity to import ( 0.15 )
Multiplier = 1/(1 – 0.60)
Multiplier = 1/ 0.4
Q:54
A)
An expansionary monetary policy will be introduced to tackle the contraction of the central bank,
which will increase the money supply on the economy and possible GDP will be accomplished by the
central bank purchasing government bonds in open market activity, so it can lower bank read a CRR
and SLR to increase the supply of money.

B)

#1

There will be a correct word change in the monetary supply curve as money supply rises, and
demand for money stays the same the interest rate will fall down.

#2

As the equilibrium interest rate decreases, demand for capital increases for consumption and
investment and thus the equilibrium amount of real money increases.

#3

As increased money supply reduces the interest rate, the aggregate demand curve will rise as credit
becomes cheap and people demand more money for consumption.

#4

When money supply rises to correct short-term supply curve recession, towards will move right to
what price will fall and GDP has abilities to kiss DB will rise to potential GDP