Question

8. Turkey opened new hospitals for coronavirus patients in Istanbul in May 2020.Government spent more than 2 billion dollars for the construction of the hospitals. Government increased the taxes by the same amount to keep the government budget in balance. How this situation will affect real GDP if MPC is equal to 0.8 ? Use spending multiplier and tax multiplier.

9. In May 2020 Monetary policy Commitee in Turkey has decided to reduce the policy rate from 8.75% to 8.25%. How this decision may affect credits and capital flows in Turkey ? Explain your answer.

10.How money market equilibrium and macroeconomic equilibrium will be affcted in the S-R if Central Bank conducts expansionary monetray policy? Answer the question by using graphs.

11.How money market equilibrium and macroeconomic equilibrium will be affctedin the S-R if Central Bank conducts contractionary monetray policy? Answer the question by using graphs.

12.What is the difference between commodity money and fiat monay?

13. Explain the relationship between net exports and net foreign investment

14.What is the saving and investment equation? If national saving declines what will happen to domestic investment and net foreign investment?

15.How the exchange rates were determined under the gold standard?

16.How the ecxhange rates are determined under floating echange rate system?

17.Which European countries currently use euro as their currency? List the name of the countries.

18.What are the determinants of exchange rates in the long run?

19.What is the difference between trade balance and current account balance?

Answer 1

Ans-8) Govt spending = $2 billion = TAXES (because taxes are increased by equal amount of govt spending), MPC = 0.8

Spending Multiplier = 1/MPS = 1/1-MPC

spending multiplier = 1 / 1- 0.8

Y/G = 1/ 0.2

Y    = 5 (2) = 10

The real GDP increases by $10 billion due to spending

Tax multiplier = - MPC (Spending multiplier )

Y/ T = - 0.8 (5)

   Y/2 = - 4 (2)

Y = - 8

Therefore real Gdp decreases by $8 billion due to taxation.