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Macroeconomics and Monetary Theory - PDF

   

Added on  2021-06-15

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FinanceEconomics
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Running Head: MACROECONOMICSMacroeconomicsName of the StudentName of the UniversityCourse ID
Macroeconomics and Monetary Theory - PDF_1

MACROECONOMICS1Table of ContentsAnswer 1..........................................................................................................................................2Answer a......................................................................................................................................2Answer b......................................................................................................................................3Answer 2..........................................................................................................................................3Answer a......................................................................................................................................3Answer b......................................................................................................................................7Answer 3........................................................................................................................................10Answer a....................................................................................................................................10Answer b....................................................................................................................................11References......................................................................................................................................13
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MACROECONOMICS2Answer 1Answer a1)The gross earnings of a movie not only depend on the number of viewers but also on theaverage price of the tickets. Earnings might be higher not because of more viewers but becauseof higher price per ticket. The true performance of the movie is this overstated if values aregrossed based on current year prices (Goodwin et al. 2014). The average ticket price of avatar in2008 was US $7.18. The price is almost 56% higher than that of the price of movie ticketTitanic. Therefore, if inflation adjustment is done then gross earnings of Avatar may be higherthan that of Titanic despite the fact that less number of viewers actually have gone to theatre. 2) The appropriate measure of how well a movie performed is at the box office is the inflationadjusted dollar value. The inflation adjusted dollar values represents the dollar value at constantprices (Agénor and Montiel 2015). A higher inflation adjusted ticket price represents a relativelyhigh value of the movie ticket. The high price of movie ticket in turn represent a high demand forviewing the movie. The high demand is a representative measure of good performance of themovie. In order to capture true performance of the movie the newspaper report dollar value ofthe movie tickets instead of number of ticket sold. 3) Comparison of number of ticket sold by all movies in 1939 with the total number of moviessold in 2015 is not a good way to measure the relative importance of the movies in the economyhas changed overtime. Variation in the number of movie ticket sold resulted from a number offactors (Bernanke, Antonovics and Frank 2015). For example, population might be increasedleading to an increase in number of tickets sold. An increases in income leads to a greater
Macroeconomics and Monetary Theory - PDF_3

MACROECONOMICS3affordability for movie tickets. The importance of movies can only be reflected from a pricecomparison of tickets in the two periods. Answer b1)Gross Domestic Product is a representative measure capturing monetary value of all the finalgoods and services produced in a given time frame. A higher GDP indicates a better performancefor the overall economy. Larger GDP means more the country is able to produce more goods andservices contributing to welfare of its people (Heijdra 2017). Aggregate values of good andservices though not the only determinant of quality of life, it is generally assumed that peopleenjoy a better quality of life in nations having a large size of GDP as compared to those having arelatively small GDP. 2) GDP is not considered as an imperfect measure of well-being as there is a number of aspectsthat are not covered under the spectrum of GDP. It does not include goods and services producedwithin the household but are not marketed. Neither it does include activities of the undergroundeconomy (Uribe and Schmitt-Grohé 2017). However, even inclusion of this activity does notmake GDP a perfect measure as it fails to measure qualitative aspects like quality of health,education, happiness, leisure and such other thing having significant influence on well-being. Answer 2Answer aThe policy of Quantitative Easing (QE) refers to a program by which central bank plansto expand market liquidity. ECB adapts the technique of QE to inject liquidity in the euro marketthrough purchasing assets and sovereign bonds (Johnson 2017). The policy has direct andindirect consequence on a number of macroeconomic variables.
Macroeconomics and Monetary Theory - PDF_4

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