Assignment on Macroeconomics Solutions

Running head: MACROECONOMICS
Macroeconomics
Name of the Student
Name of the University
Student ID

MACROECONOMICS1
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................2
Answer 3..........................................................................................................................................3
Answer 4..........................................................................................................................................4
Reference.........................................................................................................................................6

MACROECONOMICS2
Answer 1
Game of Chess B
Knight Bishop
A Queen (Win, Lose) (Win, Lose)
Bishop (Lose, Win) (Lose, Win)
Game theory is applicable in every strategic decision that we take. The theory is not only
useful in business decision making but also effective in the daily life (Aumann 2019). A good
example of decision making under game theory is Chess. Suppose there are two players A and B.
They are in the closing moves in a game of chess. It is observed that if player A, moves Queen
then irrespective of the move B player A will win. However, in the case of player B, winning is
depended on the move of player A. Whatever, be the move of player B, if player A moves
Bishop then B wins. Therefore, for player A, moving Queen is the dominant strategy but there is
no dominant strategy for B.
Answer 2
(a) Nominal income is the total amount of income earned by an individual in a given period. The
income is said to be nominal because it is not adjusted to the change in price of products. It
means that if the nominal income increases it does not mean the individual can consume more.
This is because if the price of a product increases more than the rise of income then the
individual can consume lower amount of the product than before. Thus, it is necessary to include
the concept of price change of product that is inflation. The adjusting nominal income with
inflation gives real income. Suppose, the individual has anticipated the future inflation rate and