Sample Assignment on Economics doc

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the student:
Name of the University:
Author note

1ECONOMICS ASSIGNMENT
Table of Contents
Answer 1:.........................................................................................................................................2
a:...................................................................................................................................................2
b:...................................................................................................................................................2
c:...................................................................................................................................................3
d:...................................................................................................................................................3
Answer 2:.........................................................................................................................................3
a:...................................................................................................................................................3
b:...................................................................................................................................................4
c:...................................................................................................................................................5
Answer 3:.........................................................................................................................................6
a:...................................................................................................................................................6
b:...................................................................................................................................................7
c:...................................................................................................................................................8
Reference:........................................................................................................................................9

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Answer 1:
a:
Underemployed are those person in the labor force who are presently employed into a
job, however, the person is underutilized. Contrary to this, marginal attachments refers to those
person, who do not provide any active participation in the labor force, however they are
deliberately looking for work in the coming days (Neff, 2017). Thus, underemployed people can
be treated as employed, however the marginal attachment workers will be treated as
unemployed.
b:
i:
5% people are unemployed out of total labor force. Thus, the number of people
unemployed is:
165475 x 7.5%
= (165475 x 7.5)/100
= 12410
Therefore, 12410 people are unemployed.
ii:
Labor force participation rate =
(Number of actively participating people in the labor force / Total number of eligible people to
participate in labor force) x 100

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Considering the given data, labor force participation rate is = (165475/196547) x 100
= 84.19
Therefore labor force participation rate in 84.19%.
c:
Increase in the labor force can cause a decrease in the rate of unemployment. Considering
the given information, that the number of unemployment rate remains same, which means there
is less proportion of population who are still unemployed.
Present unemployment rate = [12411 / (165475+20000)] x 100
= (12411/185475) x 100
= 6.69%
Therefore, unemployment rate at present date will change by 6.69%.
d:
Considering the given information, Ben is structurally unemployed that refers to type of
unemployment which arises due to the mismatch between the demand for skill of a labor and the
skill that a labor actually possess. As Ben is highly skilled participant in the labor force, demand
for type of job is not present in the market. Due to the lack of the demand of his skills, Ben is not
yet employed.
Answer 2:
a:
Reserve Bank of Australia or the RBA is he Central Bank of the country that plays
important role that include establishing monetary policy for the country so as to provide the

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country sound financial condition. When it comes to the gold reserve and foreign exchange of
the country, then it is also controlled by the RBA. Moreover, it is also accounted for facilitating
banking service and registry of various government agency of the country. One of the key
function of the RBA is to ensure monetary and banking policy of the Australia is in the best
interest to the Australian citizens so as to enable them to have better standard of living.
b:
i:
Money multiplier of a nation is = 1/ Reserve ratio
Assuming that the reserve ration in a country is 8%, money multiplies of the nation would be as
follows:
Money multiplier = 1/0.08
= 12.5
Therefore, the money multiplier of the nation is 12.5
ii:
Change in money supply utilizing the money multiplier = deposit x money multiplier
Money supply = 1200 x 12.5
= 15000
Change in money supply = 150000$ – 1200$ = 13800$
Therefore, change in the money supply available in the banking system is 13800$.
iii:

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Decrease in the reserve ratio is 4%
Therefore, money multiplier is = 1/0.04 = 25
New money supply is = 1200$ x 25 = 30000$
Final change in the supply of the money = 30000$ – 1200$ = 28800$
According to the theory of the money multiplier banks are used to lend their additional
reserve post reserving to the central bank. In the cyclical process, money that bank lends out get
deposited to it again that is again given as the loan and adds to the money supply (Damjanovic et
al., 2016). However, during this successive reserves, amount of money that is being lend out gets
smaller and the ratio between the change is known as the money multiplier.
c:
Open market operations is a tool that allows central bank to control the money supply in
the economy. Initially a base interest rate is set by the central bank because a fall in the interest
rate would reduce saving and return would be smaller (Del Negro & Sims, 2015). In other words,
borrowing become cheaper so that consumers can take loans at lower repayment schedule.
Figure 1: MD-MS diagram

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As the MD-MS diagram represent, if the Central Bank of Japan wants to increase the interest rate
of the country, then it has to reduce the money supply. Reduced money supply will create a new
equilibrium, where the money demand and money supply will create a new equilibrium, leading
to a higher interest rate. With the reduced money supply, there will be higher inflation rate as the
nation face reduce higher interest rate, it will lead the fall in the money supply in the successive
period that will cause rise in the price of the products and services.
Answer 3:
a:
i:
15 20 25 30 35 40 45 50
0
50
100
150
200
250
300
350
Supply Demand
E
Figure 2: supply and demand equilibrium
ii:
E is the macroeconomic equilibrium point on the diagram, where the equilibrium price is
35 and real GDP is 260 billion dollar.

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iii:
Considering the figure 2, it can be stated that there will be inflationary gap as the
equilibrium occurs at 260 billion GDP at price level 35.
b:
Considering the fact the Australia’s macroeconomic equilibrium is equal to the potential
GDP, then it can be stated that it would be long run level of output for the economy. It inherently
means that, if there is rise in the demand for the iron and coal ore, it will lead to rise in the export
of the country.
Figure 3: AD-AS model
From the figure, it can be seen that, it will shift the Ad curve from AD to AD1, which will lead
to rise in the price. Over the time, price in the economy during long run will increase through the
cyclical process until equilibrium is achieved in long run.

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c:
According to the video Japan’s GDP has fallen by 0.4% during the last quarter, however
according to the annual rate basis it is as high as 1.4%. Lower domestic demand was one of the
reason for the same, during short run price will be reduces owing to the excess supply and due to
the fall in demand unemployment will be higher and the fall in the output (Keynes, 2016).
Figure 4: AD-AS diagram
From the figure 4, it can be seen that, when it comes to long run aggregate supply curve
will shift rightward leading to production of output as high as full employment situation.

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Reference:
Damjanovic, T., Damjanovic, V., & Nolan, C. (2016). Risk Management and the Money
Multiplier (No. 2016_03). Durham University Business School.
Del Negro, M., & Sims, C. A. (2015). When does a central bank׳ s balance sheet require fiscal
support?. Journal of Monetary Economics, 73, 1-19.
Keynes, J. M. (2016). General theory of employment, interest and money. Atlantic Publishers &
Dist.
Neff, W. (2017). Work and human behavior. Routledge.