49003 Economic Evaluation: Assignment 1 - Autumn 2019

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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 68.18% 100.00% 163.64% 154.54%
Nominal GDP 750 800 970 1000
Real GDP (2018 prices) 820 850 1020 1050
WITH
INVESTMENT
A Real GDP (2018 prices)
B Real GDP (2018 prices)
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 GDP will be comparatively higher reflecting a better picture of
economy._________________________________________________________
____________________________________________________ (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? Because _Price of good is summary of expenses including wages, interest and
rent.____________________________________________________________
Assignment 1-A19 –Answer Template
Y
y

____________________________________________________ (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)?
Changes in savings = (69000-60000) = 9000
Changes in income = (64000-60000) = 4000
= 9000/ 4000 = 225%
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)
Yes No
Why? Because ____Such higher change will affect GDP deflator indicating increase in real
GDP._________________________________________________________
____________________________________________________ (no more than 10 words)
6. Will your recommendation change if, for Proposal A, people increased their annual
consumption by exactly the same amount as increase in their annual incomes (as shown in
Table 1 of the assignment)? (3 Marks)
Yes No
Why? Because ______Increase will change the decision and reduce the GDP
deflator_______________________________________________________
____________________________________________________ (no more than 10 words)
7. For what value of investment (currently investment is $40bn, expressed in 2013 prices) will
you become indifferent between recommending Proposal A or Proposal B?
(3 Marks)
$bn
Please present your calculations to support your answer.
Assignment 1-A19 –Answer Template
22
5%
Y
Y

Annexure
Assignment 1-A19 –Answer Template

Assignment 1-A19 –Answer Template

Assignment 1-A19 –Answer Template