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Eco 212 Practice Questions

Practice questions for those studying mathematics for economists

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154 views3 pages

Eco 212 Practice Questions

Practice questions for those studying mathematics for economists

Uploaded by

casquettekay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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ECO 212 PRACTICE QUESTIONS

SET 1

Important:

1. These are practice questions. Treat them as such

2. Please practice beyond these practice questions. You are encouraged to practice using the
textbooks on the course outline

1. For each of the following system of equations, find the solution using (i)Gaussian
elimination (ii)Matrix inversion and (iii) Cramer’s rule to:

2 x1  3x 2  x3  8 4 x1  10x2  x3  2
a. 4 x1  7 x 2  5 x3  20 b. 2 x1  5 x2  x3  0
 2 x 2  2 x3  0 x 2  x3 3

2 x1  x2 0
x1  x 2  x3 5
x1  2 x2  x3 0
c. d. x1  2 x 2  3x3  7
x 2  2 x3  x 4  0
x1  3x 2  6 x3  11
x3  2 x 4  0

2. The equilibrium prices for two goods satisfy the equations:

9 P1  P2  43
2 P1  7 P2  57

a. Determine the values of equilibrium prices using Gaussian elimination


b. Determine the values of equilibrium prices using matrix inversion
c. Determine the values of equilibrium prices using Cramer’s rule

3. The equilibrium prices for three interrelated goods satisfy the equations:

2 P1  4 P2  P3  77
4 P1  3P2  7 P3  114
9 P1  P2  P3  43

a. Determine the values of equilibrium prices using Gaussian elimination


b. Determine the values of equilibrium prices using matrix inversion
c. Determine the values of equilibrium prices using Cramer’s rule

Compiled by Innocent Makuta ECO 212


4. In the IS-LM model for a closed economy, an equilibrium for the economy
exists when the goods market and money are simultaneously in equilibrium.
These markets are described below:
Goods market: Money market:
C  a  bY L  kY  lR
I  I 0  iR M  M0
C  I  G0  Y M L
Where R is interest rate, L is demand for money, M money supply
a. Determine the values of equilibrium Y and R using matrix inversion
b. Determine the values of equilibrium Y and R using Cramer’s rule

5. Let the national income model be:


Y  C  I0  G
C  a  b(Y  T0 )
G  gY
Compute the equilibrium of the model

6. The equations defining a model of two trading nations are given by:

Country 1 Country 2

Y1  C1  I 1  X 1  M 1 Y2  C 2  I 2  X 2  M 2
C1  0.7Y1  50 C 2  0.8Y2  100
I 1  200 I 2  300
M 1  0.3Y1 M 2  0.1Y2
a. Find the values of Y1 and Y2.
b. Calculate the balance of payments between these countries.

7. The equations defining a general model of two trading countries are given by
Y1  C1  I 1  X 1  M 1 Y2  C 2  I 2  X 2  M 2
C1  a1Y1  b1 C 2  a 2Y2  b2
M 1  m1Y1 M 2  m2Y2
Express this system in matrix form and use Cramer’s rule to solve this system. Write
down the multiplier for Y1 due to changes in I 2 and hence give a general description
of the effect on the national income of one country due to a change in investment in
the other.

8. Let the technology matrix A be given by

0.7 0.2 0.2



A= 0.1 0.6 0.1

 
0.1 0.1 0.6 

Compiled by Innocent Makuta ECO 212


Find the gross output vectors when final demand is

1  2  2

a. 1
 
b. 1
 
c. 1
    
1 1  2

9. Each unit of water output requires inputs of 0.1 units of steel and 0.2 units of
electricity. Each unit of steel output requires inputs of 0.1 units of water and 0.2 units
of electricity. Each unit of electricity output requires inputs of 0.2 units of water and
0.1 units of steel. Determine the level of total output needed to satisfy a final demand
of 750 units of water, 300 units of steel and 700 units of electricity.

10. Given the input matrix and the final demand vector:

0.05 0.25 0.34 1800


A  0.33 0.10 0.12 d  200 
0.19 0.38 0  900 
a. Explain the meaning of the elements 0.25, 0, and 900
b. Explain the meaning of the second column sum
c. Explain the meaning of the second row sum
d. Compute the solution of output levels to this Leontief problem

Compiled by Innocent Makuta ECO 212

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