Question
1. In Goa, India, the multiplier effect of iron ore exports is calculated to be 1.62 (Ta, 2003). Calculate the impact of an additional 1,000
1. In Goa, India, the multiplier effect of iron ore exports is calculated to be 1.62 (Ta, 2003). Calculate the impact of an additional 1,000 rupees of iron ore exports on the economy of Goa.
2. Use the model of aggregate demand and short-run aggregate supply to explain how each of the following would affect real GDP and the price level in the short run.
- an increase in government purchases
- a reduction in nominal wages
- a major improvement in technology
- a reduction in net exports
3. The United Kingdom (UK) held a national referendum (vote) on whether the UK should remain in the European Union (EU), or should exit the EU. Exiting the EU is likely to have several consequences: (1) increased barriers to trade between the UK and the remaining EU countries; (2) Reduced refugee flows.
Use the AS/AD model to describe the short run and long run effect of the UK exit from the EU.
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