INSTRUCTIONS

For each of the 4 questions below, write a brief explanation in answer to each part of each question. Marks awarded will depend on the quality of the reasoning exhibited, the ability to express the argument in a concise manner (including the use of diagrams and mathematics) and the organisation of your answer.

Where



appropriate draw diagrams to illustrate your answer (these can be hand drawn).

This assignment should be answered in no more than 1,500 words. On average, no more than about a page-and-a-half of should be devoted to any one question.

This assignment is graded out of a total of 20 marks and accounts for 20% of the marks used to assess your final grade.

This assignment is due on23 october

A hardcopy of the assignment must be submitted no later than the end of your lecture on the day.

This assignment must also be submitted through Turnitin.

Question 1: (5 Marks)

Suppose the following table shows some national accounting data for a given year for some particular country.

Table 1 national accounting data

(a) Using the data given in Table 1, calculate the country's gross national expenditure, GDP and net domestic product (NDP) using the expenditure approach, and derive the country's gross national product (GNP) and its net national product (NNP). (2 marks)

(b) What is the country's current account balance? What is the country's gross national saving? (1 mark)

(c) Explain how net exports affect an economy. Why do national income accountants use net exports to compute GDP, rather than simply adding exports to the other spending components of GDP? (2 marks)

Question 2: (5 Marks)

The real GDP figures for each of 10 quarters are shown in Table 2.

Table 2 Quarterly real GDP (billions of dollars)

(a) Plot these data points and identify the two phases of the business cycle. (1 marks).

(b) Is the decline in real GDP from $600 billion to $575 billion a recession? Why and why not? (1 mark).

(c) What is the relationship of frictional, structural, seasonal and cyclical unemployment to the full-employment rate of unemployment (alternatively known as the natural rate of unemployment)? (1.5 marks)

(d) Do you agree that one goal of macroeconomics should be to reduce the measured unemployment rate to zero? Why or why not? (1.5 marks).

Question 3: (5 Marks)

(a) Compare and contrast ‘disinflation’ and ‘deflation’. (1 mark)

(b) Suppose your annual income in 2018 is $125 000. Assuming the base year for the CPI is 2011, calculate your real 2018 income measured in 2011 dollars, assuming the CPI is 130 in 2018. (2 marks)

(c) Why do some people ‘lose’ from inflation and others win? Give examples for each group (2 marks)

Question 4: (5 Marks)

(a) Explain why the aggregate demand curve is downward-sloping. How is your explanation different from the explanation for a downward-sloping demand curve for an individual product? (2 marks)

(b) With the help of a diagram, illustrate cost push inflation and its likely impact on the price level and GDP. (3 marks)