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Homework answers / question archive / Consider the following economy

Consider the following economy

Economics

Consider the following economy. C = 1000 + 0.8YD T = 0.25Y | = 325 G = 225 X = 450 M = 0.1 In equilibrium, this economy is... a. A net exporter of 450. b. A net exporter of 50. c. There is insufficient information. d. A net importer of 50.
unemployment exists when the skills that employers seek does not match the skills the potential employees have. a. Frictional. b. Cyclical. c. Structural. d. Seasonal.
The aggregate supply curve cannot be... a. Vertical. b. Upward sloping. c. Horizontal. d. Downward sloping.

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Q1) In equilibrium we have,

Y = C(Y-T) + I + G + X - M

=> Y = 1000 + 0.8*(Y - 0.25Y) + 325 + 225 + 450 - 0.1Y

=> Y = 1000 + 0.6Y + 1000 - 0.1Y

=> 0.5Y = 2000

=> Y = 2000*2 = 4000

=> Imports = M = 0.1*4000 = 400

Thus, net exports = X-M = 450 - 400 = 50

Thus, the answer is (b) net exporter of 50

Q2) The answer is (c) structual as structual unemployment is the unemployment that exists when there is a mismatch of skills between the potential workers and the demands of the employer.

Q3) The answer is (d) downward sloping

The aggregate supply can not decrease as the price increases and thus it can not be downward sloping. All other options are incorrect as aggregate supply can be upward sloping or vertical or horizontal.

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