ECONOMICS

Assignment

Assignment

Question 1a

20xx

20xx

20yy

20yy

Item

Quantities

Price

Quantities

Price

Umbrellas

800

$1

900

$7

Rain Coats

400

$2

500

$8

Solution

Country A produces only umbrellas and rain coats. The base year is 2Oxx, and the table gives the quantities produced and the prices.

a. Calculate Country A's nominal GDP in 2Oxx and 2Oyy.

Nominal GDP in 2Oxx = $ 1600

Nominal GDP in 20yy = $ 9600

Real GDP in 20w (base year is 2Oxx) = 800*1 + 400*2 + 900*1 + 500*2 = $ 3500

The economics growth between 20yy and 20xx = 9600/1600 = 6%

Real GDP in 20yy = 800*7 + 400*8 + 900*7 + 500*8 = 19100

The GDP deflator for 2Oyy is = Nominal GDP/ Real GDP * 100= 9600/19100 = 50.26%

Question 1-b

Consumption in 'Sydney

20xx

20xx

20yy

20yy

Item

Price

Quantity

Price

Quantity

Chocolate

$0.5

200

$0.7

110

T-Shirt

$50

2

$75

1

Book

$40

5

$30

10

Solution

In 20xx, consumers in Sydney consumed only chocolates, shirts and books. The prices and quantities for 20xx and 20yy are listed in the above table. The reference base period for Sydney's CPI in 20xx.

a. What is the CPI for Sydney in 20xx?

0.5 * 200 + 50 * 2 + 40 * 5 = 400

b. What is the CPI for Sydney is 20yy?

0.7 * 110 + 75 * 1 + 30 * 10 = 452

c. What is the inflation rate between 20xx and 20yy?

452-400/400 = 0.13 ==( 13%

Question 1c:

Complete the following table:

Employed

Unemployed

Labor

Unemployment

Workers

workers

force

Rate

100

10

110

9.1%

80

20

100

2%

95

5

100

5%

130

8

138

5.8%

Question 2:

The Australian Dollar (AUD) may plummet towards US$ 1 within days. The AUD, which took off on the back of soaring resources over the past few years, was struggling to hold above US$ 1.05 last night. Since its peak in late July, it has fallen almost 20 per cent against the US dollar. Explain and draw a graph to illustrate the individual effect of each of the following events on the exchange rate of the AUD against the USD.

a. An increase in the global demand for mining resources that are produced in Australia.

An increase in global demand for mining resources can be understand, if we assume fixed supply curve, international demand of mining resources can help Australia to grow their economy, increase in global demand will move and shift demand curve to rightward, it will result in short run excess demand on current price. On the other hand it will provide a upward pressure on exchange rate and rate will increase till quantity demanded equals mining production.

b. An expected decline in the global demand for mining resources that are produced in Australia.

An expected decline in mining resources globally, will have a significant impact on Australian foreign exchange, currently Australia have a comparative advantage in mineral resources mining, if we compare it with other countries, it will result in diverse and richness endowment, high quality of information regarding mining can help in reducing risk associated with exploration, processing technologies and mining processes. Attractive physical conditions and skilled labor force are some of the factors, which involve mining process need to be undertaken for increasing expectations of community that can help in bringing up social and ...