Macroeconomics Assignment Example | Topics and Well Written Essays - 250 words - 4

Macroeconomics - Assignment ExampleThe government therefore has to increase their purchases of these products to the same amount as that planned for reduction in the garmentment spending.c. A change in taxes can produce the same result. This is beca go for taxes affect the production of companies. When taxes are get downd, companies can use that gold elsewhere such as for investment purposes, they will also be motivated to increase their production as they will be paid lower taxes.d. In a balanced budget economy law makers have to be very keen on the fiscal policies that they put in place so as to restore the economy to full employment. The most feasible way this can be done is by taking of loans to invest in other areas that will be repaid over time.The blue line in the graph represents the tote up demand. The red line in the graph represents the total supply of goods and services. The black line represents the economys capacity in the long run. The equilibrium where they inte rsect is the potential output.a) When people buy goods and services victimization money the money is handed over to the stores who in turn pay their suppliers. The money circulates in the economy and is used by various people. The money supply is therefore maintained. When people use credit banks to pay for their shopping, there is no money that exchanges hands. This leads to a decrease in the money supply in the economy.b) To reduce money supply the bank should increase lending rates. Higher rates mean that fewer people will be willing to borrow money from the bank and over time, there will be a decrease in the money supply within the economy.A. i) The purchasing condition parity theory is concerned with the exchange rates (Blaug, 2006). Therates of exchange between two currencies are at equilibrium as long as their domestic purchasing power at a given exchange rate is equal. In this case, Gold should cost the same in both Mexico and U.S after taking into account the intimacy