QUESTIONS based on attachments tables:

1.4 Use the Macroeconomics data from the Keynesian school (Figure 4) in LOVE Republic and calculate the following questions (give your answers in million where applicable):

a. What is the consumption function in LOVE Republic? (2 Marks)

b. What is the equation for the AE (Aggregate Expenditure) curve in LOVE Republic? (3 Marks)

c. Calculate the equilibrium expenditure in LOVE Republic? (3 Marks)

d.Calculate the multiplier in the LOVE Republic economy? (3 Marks)

e. If the government of LOVE Republic runs a public work programme by spending $ 100 million more in the economy, what is the change in the equilibrium expenditure?(3 Marks)

1.5 Use the 2020 Monetary data from the School of Monetary from the University of the LOVE to answer the following questions(figure5):

a.Calculate M1. (2 Marks)

b.Calculate M2. (2 Marks)

c. Use the theory of the quantity theory of money to calculate the real GDP for the

LOVE Republic. (2 Marks)

d.Calculate and interpret the money multiplier for the LOVE Republic (3 Marks)

1.6 Use the exchange rate data to answer the following questions (figure 6):

a. A tourist from LOVE Republic is going to London and wishes to convert LOVE $1million to enjoy her holiday. Use the appropriate foreign exchange rate and calculate how much foreign currency the tourist would obtain from the

transaction? (2 Marks)

b. A LOVE Republic citizen visits her son who works in South Africa. Unfortunately, the cold weather in JHB triggers a minor stroke and she was admitted to a private hospital. The hospital bill come into R500 000. Calculate how much LOVE dollars are needed from LOVE Republic to discharge her from hospital? (2 Marks)

c. If the US$ exchange rate change from US$1= LOVE$160 to US$1 = LOVE $165, what happens to the value (exchange rate) of the US$? (1 Mark)

NB: --figure 5 and figure 5(continued) forms 1 table

Figure 4: Macroeconomics data from Keynesian school Keynesian school Macroeconomics data Values Autonomous consumption $250 million Investment expenditure $200 million Government expenditure $360 million The marginal propensity to consume 0.65 A flat tax rate on income 0.3 Autonomous export $200 million Autonomous import $320 million Assumptions Import is autonomous only Prices are fixed in LOVE RepublicConsumer credit card outstanding balances $15 millions Estimated velocity of circulation 150 times a year Estimated quantity of money $20 millions Price index at year 2020 125 Estimated currency drain ratio 0.25 Estimated desired reserve ratio 0.15Figure 5: 2020 Monetary data from the School of Monetary, University of the LOVE Monetary item Values Notes and coins in circulation $5 millions All the notes and coins issued by the central bank $7 millions Demand deposits $12 millions Short-term deposits (less than 6 months) $20 millions Long-term deposits (more than 6 months) $36 millionsFigure 6: Exchange rate data Exchange rate (One unit of foreign currency) Value (LOVE $) US Dollar (US $) 160 UK Sterling (UK E) 188 ZA Rand (ZAR) 8 Bit Coin 24 million