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Macro1 (ECON1010) - Assignment

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Added on  2019-11-25

Macro1 (ECON1010) - Assignment

   Added on 2019-11-25

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Macro1 (ECON1010), Sem. 2 2017Question SetMACRO1(ECON1010) Assignment 1 (Chapter 28, 26&27 Principles of Economics or Chapters 9,7 & 8 Principles ofMacroeconomics)Submit online at the ‘Assessment Task’ in BlackboardDue: 11:59PM on 10 September(Sunday)Tutorial Time and Day: _______________________________________________________________________________________________Student Name: ________________________________________________________________________________________________________Student ID: _____________________________________________________________________________________________________________This assignment covers the following topics:Unemployment (Chapter 28 or Chapter 9)Productivity and Growth (Chapter 26 or Chapter 7)Saving, Investment and Financial System (Chapter 27 or Chapter 8)READ THE FOLLOWING FIRST (Very Important)1.This assignment contributes to 20% of the overall marks for the course. 2.Only a single submissionpermitted (hence, please ensure to attach the file version of theassignment)3.Use and Submit this template onlyfor your submission (i.e., writedown your answers in the space provided in each question and submit) – any other form ofthe file is NOT accepted (Failing to do so will automatically mean zero mark for this task).4.If you do not have a word processor installed in your home computer, follow this link and in “APPS” you can use a Microsoft word processor;5.The recommended browsers when uploading the file areChrome, Firefox or Explorer (some havesuggested that Safari might not work well).6.The font size has to be at least 12.7.Explain your answers, but be succinct. 8.Label each axis and explain thediagram that you use carefully (if any). 9.Show all of your working in order to get partial credits.10.After the due dateany late submission will be marked as ‘late’. A penalty of 10% of the allocatedmarks (i.e., 2 marks) per day will apply for late submissions.11.A failure of your home computer (or any kind of the IT problem) cannot be a reason for the late submission (all requests for an extension of this nature will be rejected immediately). 12.Make sure you have included your student ID and name in the front page of the assignmentPage 1 of 7
Macro1 (ECON1010) - Assignment_1
Macro1 (ECON1010), Sem. 2 2017Question SetShort Answer Questions:1.Consider a closed economy in which GDP equals $20 billion, consumption equals $13 billion, governmentpurchases equal $3 billon and tax revenue equals $1 billion. Use this information to answer the followingquestions: (3 marks)a. What is private savings equal to in this economy? (0.5 mark)Private savings is termed as the savings done by the private people residing within the economy after usingtheir income for all essential and necessary activities (Larbi 2013). Private savings= Y-T-C Where, Y= GDP or income C= ConsumptionT= Tax paid by the citizensThus, Private Savings= $20 billion- $1 billion- $13 billion Private Savings= $ 6 billion Thus, it can be seen from the result that private savings in the economy is $ 6 billionb. What is public savings equal to in this economy? (0.5 mark)Public savings is the savings done by the government after the tax is earned and the deduction is made by theexpenditure it does in a year. It is seen that if the tax earning of the government is more than the spendingdone by the government then there is budget surplus. This show that savings of the government is positive. Onthe other hand, it is seen that if spending is more than the tax amount earned then there is budget deficit. Onother words, there are negative public savings. Further, if the spending of the government is equal to that oftax revenue then it is called as balanced budget (Ahmad and Mahmood 2013). Public savings- T-GWhere, T= TaxG= government spending Therefore, Public Savings= $1 billion- $3 billion Public Savings= -$2 billionThus, it can be seen that there is negative public savings as tax revenue is less that government purchase,which means there is budget deficit in the economy. c. How would the level of public savings impact the supply of loanable funds? (0.5 mark)Loanable find is a market where the people having the fund sell to those needing the loanable funds. Howver,the loanable fund in the market is determined by the amount of national savings. The more the national savingthe more will be the fund available. Thus if public savings rises means there is an increase in the amount ofnational savings as public saving is one of the component of national savings. Thus, any change in publicsavings has a direct effect on availability of loanable fund in the economy. Page 2 of 7
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Macro1 (ECON1010), Sem. 2 2017Question Setd. What is national saving equal to in this economy? (0.5 mark)National savings is the combination of both private and public savings in the economy. On other words it isalso consists of components such as national income, consumption and government expenditure. It answersthe totals savings an economy has made in a year. National savings= Private savings + Public savingsOr National savings= Y-C-GWhere, Y= National income C= Consumption G= Government spendingNational savings= - $2 billion+ $6 billion National savings = $4 billion Thus, it is seen that the national savings in a closed economy is $4 billion in a yeare. What are net exports equal to in this economy? (0.5 mark)The net export will be zero in this economy because it is a closed economy. This means that the country doesnot engage itself in any kind of trade with other countries or open to international market. Thus the export andimport of the country stands at zero. As net export is calculated by deducting import from the total export andas both the variables are zero, this makes net export to be zero (Baron 2014). Net export= Export – Import Net export= 0-0Net export= 0 Thus, there is no role of net export in the GDP of a closed country. f. What is investment equal to in this economy? (0.5 mark)Investment spending in economics means the total expenditure made by the economy on capital equipmentthat can be used for various economic activities. The capital equipment can be of various forms and size andthe spending on them is incurred by the economy as a whole. In macroeconomics investment calculation isincluded in the GDP formula (Coyle 2015).Investment spending is a component of GDP including other components such as consumption, governmentspending and net export.It can also be stated in a formula such as, GDP= C+I+G+NXWhere C= consumptionG= government expenditureNX= net exportHowever, it can be see that as it is a closed economy the NX will be zero. Thus, investment is only calculatedusing GDP, government spending and consumption. Investment= Y-C-GInvestment= $20 billion- $13 billion- $3 billionInvestment= $4 billionPage 3 of 7
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