Assignment on the Principles of Macroeconomics

Section A

Question 1

These tools which is explained above stabilizing the Aggregate demand and aggregate supply because the methods like GNP (gross National product) and GDP (Gross domestic product could also employed to assess the economic growth. Therefore the GDP also measure the value of services as well as goods which is produced by the nation. The GNP is measure the services and goods which is produced through the nation as well as the income from the foreign investments. The GDP is widely used which does not present the health of the economy. The GDP also measure the aggregate expenditure that is the theoretically approximate by the contributions of output of labor plus it is also used the multi-factor of productivity to present the contributions of organization as well as technical innovation. These tools are also used for the growth of economy where all of these tools is stabilizing the aggregate supply as well as aggregate demand.

Question 2

A national debt which is the accumulation of the federal budget deficits and the every new programs as well as tax which cuts ads to a debt. Then all these type of shows in the budget deficits through the large deficits also goes to the presidents. The debt and the economy are so far which been considering only for the bank debt but there are also have various entities for the lend money. And the banks which is only create the money and the lending must be done by the by the economy which is created by the bank (Surowiecki, 2009). The debt also effects on the economy where the economy and voters benefits for the deficits spending is due to the drivers of economic stability as well as growth. The government of federal which is also pays for the defense of equipment’s, building, healthcare as well as the construction along with the contract by the private firms to hire the new employees (AMADEO et al , 2020).

Question 3

Yes the Commercial banks also play the equally import to regulating the economy. Because the commercial banks is source of the financing for the very small business and the role of the commercial banks in the regulating of economy is the rests chiefly on the role of financial intermediaries. Then in this capacity the commercial banks also help to drive the flow of the capital investment by the marketplace. Then the mechanism of the chief for the capital allocation in an economy is by the process of leading that is also helps the commercial banks. As per the regulations the Commercial banks can exchange domestic currency for foreign currencies (KALPANA et al , 2017).

Section B

Question 4

The contribution of the oil sector is about 37% to GDP in 2018 in Oman Muscat. According to the central bank of Oman report the oil sectors contributed 37.1% more to the Sultanate Oman GDP in 2018 as compared to the 2017. The government also undertook the various significant policy measure in the 218 like the commercial arbitration center establishment which is adoption of the new commercial companies law as well as the further licensing streamlining process by the invest of easy order which improve the investment climate and business along with the to promote the private sector of led growth in a Sultanate. Therefore the oil factor is the big factor towards the increment of the contribution of the activities of petroleum for the national GDP ( Times News Service, 2019) .

Question 5

The crude oil prices fell dramatically by the weekend. The oil prices are increase normally supposed to reduce the economic growth as well as increase the inflation. Then in terms of the inflation the oil prices is directly effects on the prices of goods which is created by the petroleum products. Then increment in the oil prices could also depress the supply of the goods due to increase the cost of the producing them. According to the report the Middle East GDP forecast of growth is slowdown which is primarily driven through the deeper expected recession in the Iran and the region also has the largest economies. The GCC burden of generating the economic growth along with the employment which is expected to fall more on the non-oil sectors in 2019. The lower oil prices pose the challenge from the number of GCC countries like the Oman and Bahrain (Henderson, 2020).

Question 6

The falling of the oil prices also effect on the inflation and activity through shifting the aggregate supply and aggregate demand along with the triggering policy response. On the aggregate demand side through the reducing of energy bills which is the decline in the oil prices it’s also raises the consumers for the real income as well as leads to increase the oil consuming. When the oil prices increase the result is in the initial upward shift in the aggregate supply curve which is also raise the prices and the output falls along the downward slopping of the aggregate demand. The oil prices also effects on the CPI where the employment and the income might be suffered and the economic chaos of the neighboring countries. The oil prices increase is generally reduced the economic growth as well as increase the inflations.

Question 7

Impact of 2% increase in spending on the natural rate of employment in Oman is the total expenditure which is increased through the OMR 300 million and it is also compared with the budget of 2019. Then the major contributor which is also increased the expenditure and the interest payment is also increased on the borrowings. Then it is also increased through the OMR of 230 million which is compared by the 2019 budget and now the budget is OMR of 860 million. 8% budget deficit on the natural rate of employment in Oman, a 2020 budget deficits which is anticipated to be the OMR of eth 2.5 billion of the MOR billion which is less than the 2019 budget and it is also reflecting the Oman continued to focus the fiscal managements.

Question 8

By the rise of the 10% in the disposable income, the curve of aggregate demand shifts to the rights. Like the results of equilibrium of the real GDP as well as the level of prices both rise. Thus the economy which is already had the potential level then the real GDP also remain unchanged by the increases in the level of oil prices. Therefore the inflationary situation arises in an economy .In the below diagram which is shown it’s also effects to increase the disposable income and the equilibrium of their real GDP also increase from Q1 to Q2, and this the level of prices rises from P1 to P2.

Question 9

By the increase in 10% of the disposable income, the real GDP and income also increase;

Now;

Whereas as;

Y= income, C = autonomous consumption, and I = investment, and G= government expenditure, NX= net exports

Therefore the change in Y =  increase in disposable income

Question 10

With the reason of current economic crisis there is also decrease in the aggregate demand, and result is fall in the both price levels as well as in the income;

Then in order to come out the situation of government which could also take the various steps;

Monetary Policy of Expansionary:

The government is also increases the money supply through decreasing the interest rates of the supply and the loanable funds which would also increase the economy. Then it would also lead the rise in the investment as well as the aggregate demand. Then it would help to increase the both income level as well as price level.

Expansionary Fiscal policy:

If the government reduces the tax rates and increases the expenditure of the aggregate demand which would also increase. Then the result of both equilibrium of price level as well as the equilibrium of the income level would rise.