Macro Eco: Answer the following four essays. Be sure to mark all axes of any graphs that you draw. Also make sure any definitions are precise, that any examples you give me are clear, and that you answer all parts of the questions.

Economics 306 – Intermediate Macroeconomics

Essays: Answer the following four essays. Be sure to mark all axes of any graphs that you draw. Also make sure any definitions are precise, that any examples you give me are clear, and that you answer all parts of the questions.

(questions and answers format are fine, don’t have to answer these 4 questions by straight format, each question unless to use 1 example and write half-page per question)

1. The population of Japan is ageing quickly and the old, who spent a relatively small proportion of their income, are being replaced by the young who spend a relatively larger proportion of each new dollar of income. Older citizens also have different fixed consumption expenditures than in their younger days. Illustrate on a graph of planned expenditures how various changes in the components of consumption behavior of Japanese consumers can/will affect equilibrium output. Explain why the graph changes if consumption changes, and illustrate the effect on equilibrium output. Would it be possible for young Japanese to both spend a larger proportion of each new dollar of income and still save in the same proportions as their elders? Explain.

2. During economic expansions economists, investors and policy makers are always watching out for signals of the next recession. Any forecast of a turning point in the business cycle is, in part, predicated on an expected reduction in the planned spending of the private sector. First, explain why would a decline in planned spending be seen as a sign of coming weakness in GDP and the economy? Second, considering that GDP is broken into four components – C, I, G, NX – which of the subcomponents of these four general categories would most likely be the focus of the analysis, and why?

3. The Middle East contains countries with newly acquired wealth, prompting companies from all over the world to consider expanding into the region to tap into this new customer base. What will matter to these companies are their analyses of both the short-run and long-run potential for these economies. Write an essay that sets out what general aspects of these Middle East economies will be used in assessing first the short-run prospects of the economies, and then the long-run outlook for the same economies.

4. When trying to understand the future movement in the economy in the short run which matters more: the level of actual spending or the level of planned spending? Explain in detail.