Final Assessment (Main), ECON1016, Semester 2, 2021 This is an official university assessment document. Dissemination, circulation or sharing in any form (including uploading this document onto online...

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Final Assessment (Main), ECON1016, Semester 2, 2021
This is an official university assessment document.
Dissemination, circulation or sharing in any form (including uploading this document onto online platforms) has not been authorized and is strictly prohibited. Detection of the availability and usage of online versions of this document will be investigated as a matter of a
each of academic integrity.
This is an official university assessment document.
Dissemination, circulation or sharing in any form (including uploading this document onto online platforms) has not been authorized and is strictly prohibited. Detection of the availability and usage of online versions of this document will be investigated as a matter of a
each of academic integrity.
    
ECON1016 Macroeconomics 1
Assignment 3
Student name:
Student number:
Lecture group:
Date and time of Lecture:
Teacher’s name:
Assessment Declaration: This is an individual piece of assessment. That means it must be your own work and you can’t copy or have someone else complete any part of the work for you.
By submitting this assessment you are declaring that you have read, understood and agree to the content and expectations of the Assessment declaration.
Student signature and date:
[Note: Students should use this document to complete your assignment questions. Please carefully note all instructions, including the maximum word count for each question. Additional words that exceed the recommended word count for the respective question will not be considered by the examiner. After you have answered the questions, you can delete the questions and instructions within in square
ackets and simply retain the section headings and question numbers when you submit your final document. You can save this as a Word or PDF file. It is recommended that you save as PDF to preserve the text formatting of your diagrams and formulas.]
SECTION A
[This section contains five questions. This section is worth 20 marks For each question, explain whether the statement is True, False or Uncertain. Start your answer by stating your answer (“True”, “False” or “Uncertain”) and then provide a clear explanation to support your answer. Present your explanation in 100 words maximum for each question. Be sure that your answer is based on the concepts that we have learnt in this course. Answer all questions.]
Question 1
[Consider the effects of an increase in the global price of oil. For a country such as Australia, which is a net exporter of oil, this development will imply that the CPI will increase roughly by the same amount as the increase in the GDP deflator. (100 words) (4 marks)]
Your answer: [True/False/Uncertain and explain why]
Question 2
[Consider a scenario where you start new job as an economist in 2021. You successfully negotiate an employment contract with your employer where your salary is indexed to rise by 2% each year for the next two years, in line with inflation expectations at the time. In 2022, actual inflation turned out to be higher than expected. This has had the effect of increasing your purchasing power, meaning you are able to afford a higher standard of living than in previous years. (100 words) (4 marks)]
Your answer: [True/False/Uncertain and explain why]
Question 3
[Redistribution policies aim to address the problem of economic inequality, but there is a risk that these policies have the effect of suppressing economic efficiency and growth. (100 words) (4 marks)]
Your answer: [True/False/Uncertain and explain why]
Question 4
[Suppose that the government allocates more funding to universities for vaccine research. Assuming there is no change in government tax revenue, and holding constant all other factors in the economy, this policy is likely to have a positive effect on private investment in the economy. “Private investment” refers to investment in physical capital by firms and residential investment by households. (Hint: think about the effect of this policy in Loanable Funds Market XXXXXXXXXXwords) (4 marks)]
Your answer: [True/False/Uncertain and explain why]
Question 5
[Consider a small open economy such as Australia. If Australia’s saving rate (gross domestic saving as a % of GDP) is 15% , while its investment rate (domestic investment as a % of GDP) is 25%, the economy will experience a trade surplus, meaning that receipts from exports exceed expenditure on imports. (100 words) (4 marks)]
Your answer: [True/False/Uncertain and explain why]
SECTION B
[This section is worth 30 marks. Provide a clear answer for each question, including a diagram or numerical calculation if requested. Be sure that your answers are based on the concepts that we have learnt in this course. Answer all questions.]
[Hint for diagrams: If asked to include a diagram, you may create your own diagram using the appropriate tools within your software package. Alternatively, you may paste a relevant already-made diagram into your document as an image, citing the source of your diagram.]
Question 1
[The Singapore Government has taken various fiscal policy measures to manage the economic impacts of the COVID-19 pandemic and support the economy through the pandemic-induced recession.]
(a) [We learnt in class that fiscal policy measures mainly work through the Aggregate Demand side of the economy in the short run. Discuss two macroeconomic effects that affect the size and the direction of the shift in Aggregate Demand (50 words total). Provide a diagram to illustrate these effects. (4 marks)]
Your answer:
(b) Suppose that a country’s household saving rate (savings as % of GDP) increased from 54% in 2019 to 55% in 2020. Explain whether this would strengthen or weaken the size of the economy’s fiscal policy multiplier or leave it unchanged, and the reasons why? (50 words total) Next, use these figures presented in (b) to calculate the value of multiplier for 2020. Present your calculation formula and all of your working. Write a clear sentence explaining how to interpret the final number. (4 marks)]
Your answer:
(c) [Suppose the Singapore Government implements a fiscal stimulus package, through an increase in government spending worth $120 billion in 2020. Using the information presented in part (b) of this question, calculate your forecast of the overall impact of the government’s stimulus package once the full effects are circulated throughout the economy. Be sure to show all your working and calculation formula. You can round off the value of the multiplier to 2 decimal places, and present your final answer rounded off to 2 decimal places. Write a clear sentence explaining how to interpret this final number. (2 marks) ]
Your answer:
Question 2
[We learnt in the classes that fiscal and monetary policy measures are mainly implemented to manage short-term economic fluctuations, known as business cycles. We also learnt that policymakers are interested in bolstering the country’s economic long-term productive capacity, which contributes towards stronger prosperity and wellbeing.]
(a) [A nation’s prosperity is strongly dependent on the productive capacity of its economy. What are the main factors (or “ingredients”) that determine a country’s productive capacity economy? Are there any limitations to these sources of growth and productivity? (100 words) (4 marks) ]
Your answer:
(b) We know from our lectures that technological progress (innovation, ideas, knowledge
eakthroughs) can help overcome ba
iers to economic growth as discussed in part (a) of this question. Explain the impact of innovation and technological progress on the economy by using any two of the economic models discussed in the classes. For each model, provide a clearly labelled diagram illustrating the effects of an improvement in technological progress and innovation, accompanying by a
ief explanation of the diagram (50 words for each of your choice of 2 models). [Hint: The macroeconomic models we have learnt in class include: the AD-AS model, Production Function model, and Business Cycle model] (4 marks)]
Your answer:
(c) Give two examples of public policy measures that can foster long term economic growth? (50 words total) (2 marks)]
Your answer:
Question 3
[Consider how the COVID-19 pandemic has caused major disruption in global supply chain affecting the supply of critical inputs to production. This has negatively affected the supply side of Singaporean economy on a large scale.]
(a) [Illustrate the impact of this supply-side disruption on the Singaporean economy using the AD-AS model. Assume that the economy was initially in good shape and operating at its potential represented by Y* (100 words) (4 marks).]
Your answer:

(b) [Following this shock to the economy, as described in part (a) of this question, indicate what would be the response of the Central Bank for each of the scenarios below. Highlight any trade-offs that the Central Bank must consider for each of these potential responses (100 words total) (4 marks)
Scenario (i) - Assume the Central Bank is most concerned about inflation.
Scenario (ii) - Assume the Central Bank is most concerned about unemployment.
Explain the policy action that the Central Bank would take under each assumption, and note the potential trade-off associated with each policy action (100 words maximum for each scenario). Include an AD-AS diagram for each to illustrate the effects on the economy.]
Your answer:
(c) [Suppose, instead of the policy actions described in part (b), that there is no policy intervention to address the fallout of the shock described in part (a). In the absence of any policy intervention (monetary or fiscal), what type of free market adjustment would need to occur for the economy to eventually return to Y*? Include an AD-AS diagram to illustrate (100 words) (4 marks). (Hint: Start with the scenario you illustrated in your answer to part (a).]
Your answer:
(End of assessment)
4
Answered 5 days AfterApr 05, 2022RMIT University

Solution

Komalavalli answered on Apr 10 2022
11 Votes
Question 1:
TRUE
According to the Australian Bureau of Statistics' December consumer price index, the price of a typical basket of products used to calculate the cost of living is growing by 3.5 percent. Even still, gasoline provides a major direct contribution, increasing by 6.6 percent last quarter and nearly a third over the previous year. However, homeowners are not the only ones that rely on gasoline and diesel for transportation. Businesses are as well. Fuel expenses are pushing rates for a range of items, including florists sent by an Interflora florist.
Question 2:
FALSE
Income and spending determine one's level of life. Inflation happens when the cost of living rises. Inflation is caused by a supply-demand mismatch. As more individuals compete for a limited amount of items, prices rise. From given information we observe that the actual inflation was more than the expected one. So, actual wage or income is less compared to inflation. This indicates low income and high inflation results in low standard of living compared to previous year.
Question 3:
TRUE
Income redistribution will relieve poverty by lowering inequality. However, this may not considerably enhance growth, unless it alleviates social tensions produced by inequality and allows the poor to dedicate more resources to collecting material and human capital Direct investment in impoverished people's possibilities is critical. Remittances to the impoverished should not simply be in cash; they should also help individuals produce income Both now and in the future Access to health care, microcredit, water, energy, and transportation, as well as education and training, are all critical instruments. When negative shocks occur, social support is critical to preventing individuals from sliding into poverty.
Question 4:
True
Allocating more fund to vaccine research indicates increase in supply of loanable funds results in decrease in interest rate, this results in attraction of private investment which indicates there is a opportunity for long run economic growth. Lower interest rates boost company investment by making it more affordable and simple to bo
ow money for new initiatives. They have a comparable effect on clients who are considering making a new purchase or purchasing a house because of reduced financing rates.
Lowering interest rates to promote the economy or rising interest rates to stifle it is an important component of national monetary policy.
Question 5:
False
Domestic investment indicates the investment with in a country rather than a foreign investment while domestic saving indicates a savings within a country, both of the indicators indicates a transaction within a nation. Therefore there is no space for trade.
Section B
From above diagram let us consider the Singapore economy is at level Aggregate demand curve equals short run aggregate supply curve during covid 19 out
eaks. When Singapore government adopted an expansionary fiscal policy that is cut in tax rate and...
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