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Final Economy

The document discusses three main economic problems facing Egypt: monetary issues, fiscal imbalances, and structural distortions. It outlines conditions imposed by the IMF under an extended fund facility to address these problems. Specifically, the IMF required Egypt to liberalize its exchange rate, reduce subsidies and government spending to balance the budget, and eliminate business regulations to spur investment. The response analyzes Egypt's compliance with reforms in these three areas to remedy high debt, inflation, unemployment and other economic issues.

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A.Rahman Salah
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188 views6 pages

Final Economy

The document discusses three main economic problems facing Egypt: monetary issues, fiscal imbalances, and structural distortions. It outlines conditions imposed by the IMF under an extended fund facility to address these problems. Specifically, the IMF required Egypt to liberalize its exchange rate, reduce subsidies and government spending to balance the budget, and eliminate business regulations to spur investment. The response analyzes Egypt's compliance with reforms in these three areas to remedy high debt, inflation, unemployment and other economic issues.

Uploaded by

A.Rahman Salah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Managerial Economics Final Exam

Group Tuesday (..)

Presented by : Walaa El Din

Presented to : Dr. Lamees El Araby


Question 1:

Assume there is a well-defined geographic area of a city. The area is


composed exclusively of apartments and is populated by low-income
residents. The people who live in the area tend to stay in that area
because (1) they cannot afford to live in other areas of the city, (2)
they prefer to live with people of their own ethnic group, or (3) there
is discrimination against them in other areas of the city

(1) Would the demand for apartments in this area be relatively inelastic or
relatively elastic? State why.
(2) Would the supply of apartments in this area be relatively inelastic or
relatively elastic? State why.
(3) Draw the demand and supply curves as you have described them,
showing the initial equilibrium price and quantity.

Answer

1) The demand would be relatively inelastic because there are


few substitutes for the apartments in this area. However, you
might argue that demand would be relatively elastic because
the rent is a high proportion of the renters' incomes. A raise in
rent could cause renters to leave the city altogether or to have
to live on the streets

2) The supply would be relatively elastic because a low income


area and that there is probably not much free land available,
it's likely that the quantity supplied would increase only a
little even at increased rent, building apartments in low
income areas is not a good investment for apartment owners

3) The demand should be drawn as steep (unless you argued that


demand was relatively elastic
Question (2)

Select and name a market of any well-known product (left upon your
imagination), draw its market diagram, state and name four different
factors that might cause changes, showing the changes in equilibrium
price and quantity

Answer

Clothes are well-known products that fall under the category of a perfectly
competitive market.
A perfectly competitive market is a type of market where there is a large number
of buyers and sellers selling homogenous products, with all of them initiating the
buying and selling mechanism. There are no barriers of entry, there is perfect
information and absence of direct competition in the market and sellers are price
takers.
 
The market diagram for clothes is as follows
The four factors that might cause changes in the product equilibrium price and
quantity include the following:
·        Changes in the product price.
·        Changes in consumer's level of income.
·        Changes in tastes and preferences.
·        Changes in the price of substitute products.
 
The market diagram for clothes showing the changes due to the above factors is
as below:
Question (3)

"The International Monetary Fund has put some conditions to


address Monetary, Fiscal and Structural problems that faced the
Egyptian economy."
Discuss the last sentence, addressing the main problems at the Egyptian
economy, and Egypt Compliance with the conditions, under IMF extended
Fund Facilities.

Answer

The major problems that have affected Egypt's economy include high rates of
open and disguised unemployment, debt service burden, high rates of inflation,
substantial budget deficits, widespread price-control distortions, low
productivity, and acute external imbalances. Egypt and IMF came to an
agreement where IMF formulated structural reforms that Egypt would employ in
place to sort out the issues pertaining to their economic problems. Egypt had to
comply to several programs issued by IMF to their economy.
In monetary reforms, the Egyptian government limited dollar transfers abroad
causing hoarding and rise in black market rates. IMF saw liberalizing Egypt's
exchange-rate regime as a key component in offsetting the emergent problems.
Devaluation led to Egypt's remittance reaching $8 billion in the second quarter
of 2017. IMF also directed Egypt to liberalize foreign exchange system as it
would spur investment and exports.
Fiscal reforms aimed at reducing the budget deficit by reducing government
spending on subsidies. The government complied by cutting fuel subsidies with
an effort of complying with EFF to decrease spending. Introduction of smart
card system in Egypt also aimed at reducing spending by determining the
allocation of subsidies. IMF stated that the smart card holders to be granted an
increased subsidies of 21 EGP per person from 12.
Structural reforms eliminated some regulations of starting up a business, which
was complicated, and involved a lot of regulations. A new investment law
minimized the regulations and continued to provide free and highly discounted
land for certain projects.

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