“BUECO5903 BUSINESS ECONOMICS
MACROECONOMICS ASSIGNMENT
Semester 2, 2013

The due date is provided in the Course Description.

Part B Macroeconomics Worth 10% of total
assessment:
Answer any five (5) of the following nine (9)
questions. Each question is worth 10
marks;

Question 1:

An
economy is currently in equilibrium and the following figures refer to elements
in its national accounts:

$
Billion
Consumption
(total) 80
Investment
7
Government
expenditure 9
Imports 12
Exports 8

(a)
What is the
current equilibrium level of GDP? (1
mark)

(b)
What is the level
of injections? (1 mark)

(c)
What is the level
of withdrawals? (1 mark)

(d)
Assuming that tax
revenues are $7 billion, what is the value of savings? (1 mark)

(e)
If GDP now rises
to $80 billion and, as a result, the consumption of domestically produced goods
rises to $58 billion, what is the MPCd? (i.e. marginal propensity to consume domestic
goods) (2 marks)

(f)
What is the value
of the multiplier? (2 marks)

(g)
Given an initial
level of GDP of $80 billion, assume that spending on exports rises by $4
billion, spending on investment rises by $1 billion, while government
expenditure falls by $2 billion. By how
much will GDP change? (2 marks)

Question 2:

(a)
Which of the
following are final goods and services and which are intermediate goods and
services? Please explain why in your
answer. (4 marks 1 mark each)

(i)
A new bulldozer
to be used by a construction company;

(ii)
A windscreen
purchased by a motor vehicle spare parts supplier;

(iii)
A home call car
tuning service as a franchise of large national chain;

(iv)
Coking coal

(b)
An economy
produces final goods and services with a market value of $900 billion in a
given year, but only $875 billion worth of goods and services is sold to
domestic or foreign buyers.
Is this nations GDP $900 billion or $875
billion? Explain your answer. (2 marks)

(c)
Explain why a new
truck sold for use by a transport company is a final good, even though it is a
fixed investment (capital) used to produce other goods. (2 marks)
Should
the value of this truck then be added to GDP or should only the goods it
transports be included in GDP? (2 marks)

Question 3:

(10
marks total – 2.5 marks each part)

(a)
Illustrate and
explain with diagrams the difference between demand-pull and cost-push inflation; (2.5 marks for the diagram and 2.5 marks for
the explanation);

(b)
Provide
(describe) two (2) causes of each type of inflation
(2.5
marks for 2 demand-pull causes and 2.5 marks for 2 cost-push causes)

Question 4:

(a)
Do you think that
macroeconomic policy should be designed to achieve a measured unemployment rate
of zero? Why or why not should this be
the case? (5 marks)

(b)
How did the
classical economists interpret long-run unemployment? (2.5 marks)

(c)
How does structural
and cyclical unemployment differ and how concerned should policymakers be about
these types of unemployment? (2.5 marks)

Question 5:
(2.5
marks each part)

Using
the aggregate demand aggregate supply (AD-AS) diagram, show how the four
economic events would affect economic activity and the price level. (Note: use
a separate AD-AS diagram for each event)

(a)
An improvement in
the marketing and selling skills of firm managers;

(b)
An decrease in
personal income tax;

(c)
An increase in imports
accompanied by an increase in exports;

(d)
A significant
destruction in an economys capital stock because of natural disaster;

Question 6:
(5
marks for diagrams and 5 marks for written analysis)

Nominate
two areas or issues of concern in your home nations economy. Illustrate and explain using suitable
diagrams some policy options or adjustments that could be employed to correct
for these perceived issues of concern.

Question 7:
(a)
The
consumer price index (i.e. CPI) is the most commonly used measure of changes in
the general level of prices in Australia.
Discuss some of the advantages and disadvantages of using this measure. (4 marks)

(b)
Explain why some
people lose from inflation and why do some people win from inflation? (6 marks)

Question 8:

Which of the
following would cause a growth in the money supply? Answer yes, no, or possiblyand explain your answer in each case (i.e.
please provide reasons). (2 marks each)

(a) The
purchase of government securities from banks;
(b) An increase in interest rates;
(c) An increase in government expenditure,
financed by borrowing from the banking sector;
(d)
The purchase of government securities by the Central Bank from the banking
sector;
(e) It is agreed by the Treasurer and theGovernor of the Central Bank to reduce
the target rate of inflation

Question 9:
The following are the various
elements within a nations balance of payments account:
(i) Imports of goods (-)
(ii) Exports of goods (+)
(iii) Imports of services (-)
(iv) Exports of services (+)
(v) Other income outflows (-)
(vi) Other income inflows (+)
(vii)
Capital transfers sent overseas from the
nation ()
(viii) Capital transfers to the nation from overseas
(+)
(ix) The nations investments overseas (-)
(x) Investment in the nation from overseas (+)
(xi) Short-term financial outflows (-)
(xii) Short-term financial inflows (+)
(xiii) Adding to reserves (-)
(xiv) Drawing on reserves (+)

Into
which of the above categories would you put the following? (total 10 marks 1 mark each)
(a) ………………………………………………………… DVD
recorders imported into the nation from Japan;
(b) Insurance cover purchased in the nation
by overseas residents;
(c) The nation gives overseas aid to a
developing country;
(d) A US car company sets up a factory in the
nation;
(e) Some of the nations residents take a
holiday in Bali;
(f) Interest earned by the nations
residents on overseas assets;
(g) Running down the stock of foreign
exchange in the Central Bank of the nation;
(h) Migrants to the nation transferring
property to the nation;
(i) New deposits made in banks in the
nation by overseas residents;
(j) The nations palm oil is sold in the United
Kingdom.BUECO5903 BUSINESS ECONOMICS MACROECONOMICS ASSIGNMENTSemester 2, 2013The due date is provided in the Course Description.Part B Macroeconomics Worth 10% of total
assessment:Answer any five (5) of the following nine (9)
questions. Each question is worth 10
marks;Question 1:An
economy is currently in equilibrium and the following figures refer to elements
in its national accounts: $
BillionConsumption
(total) 80Investment
7Government
expenditure 9Imports 12Exports 8(a)
What is the
current equilibrium level of GDP? (1
mark)(b)
What is the level
of injections? (1 mark)(c)
What is the level
of withdrawals? (1 mark)(d)
Assuming that tax
revenues are $7 billion, what is the value of savings? (1 mark)(e)
If GDP now rises
to $80 billion and, as a result, the consumption of domestically produced goods
rises to $58 billion, what is the MPCd? (i.e. marginal propensity to consume domestic
goods) (2 marks)(f)
What is the value
of the multiplier? (2 marks)(g)
Given an initial
level of GDP of $80 billion, assume that spending on exports rises by $4
billion, spending on investment rises by $1 billion, while government
expenditure falls by $2 billion. By how
much will GDP change? (2 marks)Question 2:(a)
Which of the
following are final goods and services and which are intermediate goods and
services? Please explain why in your
answer. (4 marks 1 mark each)(i)
A new bulldozer
to be used by a construction company;(ii)
A windscreen
purchased by a motor vehicle spare parts supplier;(iii)
A home call car
tuning service as a franchise of large national chain;(iv)
Coking coal(b)
An economy
produces final goods and services with a market value of $900 billion in a
given year, but only $875 billion worth of goods and services is sold to
domestic or foreign buyers.Is this nations GDP $900 billion or $875
billion? Explain your answer. (2 marks)(c)
Explain why a new
truck sold for use by a transport company is a final good, even though it is a
fixed investment (capital) used to produce other goods. (2 marks)Should
the value of this truck then be added to GDP or should only the goods it
transports be included in GDP? (2 marks)Question 3: (10
marks total – 2.5 marks each part)(a)
Illustrate and
explain with diagrams the difference between demand-pull and cost-push inflation; (2.5 marks for the diagram and 2.5 marks for
the explanation); (b)
Provide
(describe) two (2) causes of each type of inflation (2.5
marks for 2 demand-pull causes and 2.5 marks for 2 cost-push causes)Question 4:(a)
Do you think that
macroeconomic policy should be designed to achieve a measured unemployment rate
of zero? Why or why not should this be
the case? (5 marks)(b)
How did the
classical economists interpret long-run unemployment? (2.5 marks) (c)
How does structural
and cyclical unemployment differ and how concerned should policymakers be about
these types of unemployment? (2.5 marks)Question 5:(2.5
marks each part)Using
the aggregate demand aggregate supply (AD-AS) diagram, show how the four
economic events would affect economic activity and the price level. (Note: use
a separate AD-AS diagram for each event)(a)
An improvement in
the marketing and selling skills of firm managers;(b)
An decrease in
personal income tax;(c)
An increase in imports
accompanied by an increase in exports;(d)
A significant
destruction in an economys capital stock because of natural disaster;Question 6:(5
marks for diagrams and 5 marks for written analysis)Nominate
two areas or issues of concern in your home nations economy. Illustrate and explain using suitable
diagrams some policy options or adjustments that could be employed to correct
for these perceived issues of concern. Question 7:(a)
The
consumer price index (i.e. CPI) is the most commonly used measure of changes in
the general level of prices in Australia.
Discuss some of the advantages and disadvantages of using this measure. (4 marks)(b)
Explain why some
people lose from inflation and why do some people win from inflation? (6 marks)Question 8:Which of the
following would cause a growth in the money supply? Answer yes, no, or possiblyand explain your answer in each case (i.e.
please provide reasons). (2 marks each)(a) The
purchase of government securities from banks;(b) An increase in interest rates;(c) An increase in government expenditure,
financed by borrowing from the banking sector;(d)
The purchase of government securities by the Central Bank from the banking
sector; (e) It is agreed by the Treasurer and theGovernor of the Central Bank to reduce
the target rate of inflationQuestion 9:The following are the various
elements within a nations balance of payments account: (i) Imports of goods (-) (ii) Exports of goods (+) (iii) Imports of services (-) (iv) Exports of services (+) (v) Other income outflows (-) (vi) Other income inflows (+)(vii)
Capital transfers sent overseas from the
nation () (viii) Capital transfers to the nation from overseas
(+) (ix) The nations investments overseas (-) (x) Investment in the nation from overseas (+) (xi) Short-term financial outflows (-) (xii) Short-term financial inflows (+) (xiii) Adding to reserves (-) (xiv) Drawing on reserves (+) Into
which of the above categories would you put the following? (total 10 marks 1 mark each) (a) ………………………………………………………… DVD
recorders imported into the nation from Japan; (b) Insurance cover purchased in the nation
by overseas residents; (c) The nation gives overseas aid to a
developing country; (d) A US car company sets up a factory in the
nation; (e) Some of the nations residents take a
holiday in Bali; (f) Interest earned by the nations
residents on overseas assets; (g) Running down the stock of foreign
exchange in the Central Bank of the nation; (h) Migrants to the nation transferring
property to the nation; (i) New deposits made in banks in the
nation by overseas residents; (j) The nations palm oil is sold in the United
Kingdom.”