Questions - Macroeconomics part 1

1. 
   
   1. State 3 possible macro economic policy objectives of the Maldives government.
   
   2. Show using a diagram, the potential impact on Maldives GDP of a continuing fall in tourist arrivals. 
   

   
   3. Evaluate with the help of appropriate diagrams, whether unemployment subsidies, or conducting a youth training program is likely to be more effective in reducing the level of youth unemployment in the Maldives. 

   
   4. Using the concept of Production Possibilities Frontier, explain how a developing country, and developed country achieves economic growth.
   
   5. Define structural unemployment.
   
   6. Explain the concept of diminishing marginal returns using the total capital accumulation in a country. 
   
   7. Explain the difference between demand-pull inflation and cost-push inflation.
   
   8. Using both aggregate demand and aggregate supply diagrams, explain how the government uses its fiscal policy to counter fluctuations in the business cycles in the economy, over a period of ten years. 
   
   9. Differentiate between nominal and real GDP. 
   
   10. Discuss the limitations of using the Consumer Price Index (CPI) to calculate the inflation of a country.
   
   
   11. Some people envisage a sharp increase in the proportion of old age pensioners in the population. Assuming that pensions are paid out by the government and that old age pensioners tend to spend more time abroad than the young, what will be the effects of the increase in their number on the economy:
   
   
   (a) when there is no capital mobility and the exchange rate is fixed;
   (b) when there is capital mobility and the exchange rate is fixed;
   (c) when there is capital mobility and the exchange rate is flexible. 
   
   
   
   
   12. To encourage savings in the Maldivian economy, the government proposes to shift from an income tax system to a system of consumption tax.
   
   
   

   1. (a)  what will be the effects of the change on total consumption?
      
   2. (b)  what will happen to equilibrium levels of income, and savings when wages and prices are fixed?
      
   3. (c)  how will your answer to (b) change had wages and prices been flexible?