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Economic Discussion Questions

Q.1. In most developing countries, there are long lines of taxis at airports, and these taxis often wait two or three hours. What does this tell you about the price in that market? Discuss using supply demand analysis. (200 to 300 words)
Q.2. In the mid 1990s, Japan's annual money supply growth rate fell to 1-2 percent from an average annual rate of 10-11 percent in the late 1980s. Explain what effect did this decline have on: (Total 200 to 300 words)
a. Japanese real output?
b. Japanese unemployment?
c. Japanese inflation?

Q.3. Change in Income (∆Y) = $1000 billion
Change in Consumption (∆C) = $900 billion

a) What is the Multiplier?
b) If as a result of decrease in taxes by government, national income goes up immediately by $100 billion what will be the effect after the Multiplier process is complete.

Q.4 Are you in favor of either deficit spending on the part of government or one of a balanced federal budget and budget surpluses? My position is in favor of a balanced federal budget and budget surplus.

Present your argument and discuss the economic situations when your position can be successfully implemented and when it may be doomed to failure. (500 to 750 words)

Solution Preview

Per BrainMass policy, I cannot provide you with a complete answer; however I will give you a good start on these problems.

Q.1. In most developing countries, there are long lines of taxis at airports, and these taxis often wait two or three hours. What does this tell you about the price in that market? Discuss using supply demand analysis. (200 to 300 words)

Demand analysis is generally done graphically. Put price on the y axis and quantity on the x axis. The supply curve will be upward sloping because at lower prices, providers will not want to produce as much. The demand curve goes the opposite way. Clearly, the market is not at equilibrium because of the long lines of taxis. There is more supply than demand. Where does this lie on your graph? Which way would the price need to move in order to bring the market to equilibrium?

This discussion will likely not take the entire 200 words, so I suggest you talk about reasons for the imbalance. Why would the market not find equilibrium?

Q.2. In the mid 1990s, Japan's annual money supply growth rate fell to 1-2 percent from an average annual rate of 10-11 percent in the late 1980s. Explain what effect did this decline have on: (Total 200 to 300 words)
a. Japanese real output?
b. Japanese unemployment?
c. Japanese inflation?

You need to construct an IS-LM model to answer these questions (see attached file). The IS-LM curve represents the interaction between the real and nominal parts of the economy. IS stands for investment=savings and LM stands for liquidity preference=money demand. The Y axis is ...

Solution Summary

Assistance with understanding economic topics related to the multiplier, money supply, and deficit spending.

$2.19