Economic Evaluation Assignment

Name:
Student #:
49003 ECONOMIC EVALUATION
Assignment #1 (Autumn 2019)
Due date: 26 April 2019
ANSWER-TEMPLATE
1. Provide a summary of the economic performance of the country - in the Table below.
(7 Marks)
2008 2013 2018 2023
WITHOUT
INVESTMENT GDP Deflator 107% 100% 133% 121%
Nominal GDP 750 1100 1800 1700
Real GDP (2018 prices) 900 1450 1800 1850
WITH
INVESTMENT
A Real GDP (2018 prices)
1700
B Real GDP (2018 prices) 440
Notes: 1) Base year for GDP Deflators is 2013.
2) All entries in this table must be rounded-off to the nearest zeros, i.e., no decimal points.
2. Which proposal will you recommend? (3 Marks)
A B Either Neither
Why? Because _____The amount of investment for project B is low compared to project
A________________________________________________________
Assignment 1-A19 –Answer Template
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____________________________________________________ (no more than 10 words)
3. Is the proposal, in this assignment, to invest in infrastructure based on Keynesian or Neo-
classical reasoning? (3 Marks)
Keynesian Neo-classical Either Neither
Why? Neo-classical economists assume investment as a part of capital formation.
_____________________________________________________
____________________________________________________ (no more than 10 words)
4. What value of ‘Marginal Propensity to Save’ is implicit in your calculations for proposal B?
(3 Marks)
Please present your calculations here (just two steps of calculations)?
In 2023, average income $ 64000 bn; average saving = $- 5000 bn
When, GDP $440 bn savings (440-400) = $ 40 bn
(1150-400)= $750 bn
MPS= (750-40)/(1150-440) = 710/710 = 1
5. Will you recommendation change if, say, due to unforeseen Global Financial Crises, the
economy experiences very high inflation and - as a result – the GDP Deflator for 2023
becomes 300? (3 Marks)
Assignment 1-A19 –Answer Template
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