Assignment-1-Macroeconomics in business

       Assignment-1

Macroeconomics in business

Duration: 4 days

1. What is investment multiplier? Explain graphically

2. What is Government expenditure multiplier? Explain graphically

3. What is balanced budget multiplier? Explain graphically

4. How does multiplier work? Show the relationship among multiplier and MPC and MPS. Use relevant graphs and numerical tools.

5. Let, Y=C+I+G where C=100+0.75Y and I=30, G=80

a)      Find out the equilibrium national income and consumption expenditure

b)      If investment increases by tk.500, how much the value of income will change?

c)      If investment decreases by tk.20, how much the value of income will change?

d)      If Government expenditure increases by tk.800, how much the value of income will change?

e)      If Government expenditure decreases by tk.40, how much the value of income will change?

f)        If MPC increases to 0.85, how much the value of income will change?

g)      If MPC decreases to 0.55, how much the value of income will change?

6. Define Investment, Gross Investment, Net Investment, Real interest rate, autonomous Investment and induced Investment. Use relevant graphs.

7. What are the influencing factors of investment spending or the determinant of investments? Explain precisely.

8. Draw an investment demand curve and show the relationship between interest rate and investment. When investment demand curve shift? Show graphically.

9. Describe the MEC (Marginal    Efficiency of Capital) criterion. How does a firm reach optimum level of investment by using the MEC criterion?

10. Consider the following project proposals:

Project-1         project-2         project-3

Cost:                                       40                    30                    25

Return in 1^st period:               20                    18                    16

Return in 2^nd period:              25                    30                    28

According to MEC criterion, which project you will take when the market interest rate is 12% and 10%? Give your argument in favor of your answer.

11. What is Paradox of thrift? How it can be solved? Explain graphically.
12. What are the difference between investment and capital?

Instructions: Please be precise in your answer Follow the assigned book and any other book if relevant. Please submit the name of all group members with answer sheet Please submit the Assignment within the due time (4 days) Please do not copy your answer from others; it will certainly damage your brain.

                                                                                    Friday, February 24, 2012