Macroeconomics

Running head: Macroeconomics
Macroeconomics
Name of the Student
Name of the University
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Macroeconomics1
Table of Contents
Answer 2b........................................................................................................................................2
Answer 3..........................................................................................................................................3
Answer 4..........................................................................................................................................3
Answer 6..........................................................................................................................................5
Answer 8..........................................................................................................................................6
References........................................................................................................................................7

Macroeconomics2
Answer 2b
Uncertainty is an economic phenomena that cannot be predicted and thus it is
uncontrollable. On the other hand, risk is the phenomena outcome which can be predicted and
can be avoided as it is controllable (Halpern, 2017). Apart from that, risk is quantifiable as the
outcome is known and uncertainty is not as outcome is unknown.
Interest rate is the amount at which investment gets its return given a specified time
period whereas exchange rate is the value of money one get by exchanging one currency with
another (Cairns, 2018). Additionally exchange rate changes with the change in interest rate and
both share a positive relationship. Interest rate is the cause and exchange rate is the effect.
Supply side shock is the shock that occurs to an economy due to supply side factors such
as change in labour force, fall in supply of crude oil and factors of production (Hurst, 2015). It
depends on the supply side performer of an economy. Alternatively, demand side shock is the
shock that occurs to an economy due to increase in consumption demand and it solely depends
on the behaviour of the consumer (Kang, Gracia & Ratti, 2017). Supply side shock causes cost
push inflation and demand side shock causes demand pull inflation.
Trade deficit occurs when a country participates in international trade market and spends
more in imports than its export (Baker, 2018). However, in the case of net foreign debt it does
not involve in any kind of trade with any country but takes loan from other countries for
development. Thus, if the loans taken by a country is not repaid in then net foreign debt
increases, however, this is not the case with trade deficit as it deals in goods and services.