SFM 121 Group Assignments marking Guide

Group 1
P Q
1. Laspeyres Index = (P1 Q0 ) × 100
0 0

($5 ×4 +$35 ×2)

= (($3 ×4 +$15 ×2)) × 100

$20 + $70
= ( ) × 100
$12 + $30
$90
= × 100
$42

= 214 [6]
2. Importance of official statistics 2 marks each point explained [10]
 Official statistics enable the evaluation of government performance.
 Official statistics are for the benefit of our society in directing economic and
commercial activities
 They provide valuable data and evidence for analysts, researchers, public and voluntary
bodies to use
 enabling the public to hold to account all organisations that spend public money, and
informing wider public debate.
 official statistics, analysis and advice enables sound policy decisions by providing a
firm evidence base for decision-making both inside and outside of government.
3. Hot Money
Hot money is money that investors regularly move between economies and financial
markets to profit from highest short-term interest rates. Banks bring in hot money into an
economy by providing short-term certificates of deposit that are higher than average. [2]

Balance of trade (BOT)

The balance of trade is the difference between the value of a country's imports and exports
for a given period. The balance of trade is the largest component of a country's balance of
payments. Economists use the BOT to measure the relative strength of a country's
economy. The balance of trade is also referred to as the trade balance or the international
trade balance. [2]

Group 2
 ∑ p𝑖 n𝑖 0.0893 ×112 +0.234 ×94 +0.132 ×144 51.0056
1. CDR1 = = = = 0.1457 [2.5]
N 350 350
∑ p𝑖 n𝑖 0.1 ×170 +0.243 ×70 +0.155 ×110 51.06
CDR 2 = = = = 0.1458 [2.5]
N 350 350

2. BOP accounts
Current Account
Consists of 4 sub-categories namely:-
(i) Trade balance or visible balance, which is purely merchandise trade (net exports or imports
of tangible goods).
(ii) Services trade – is the export and import of services e.g. services provided by banks to
foreign importers and exporters
(iii) Net income – investment income from direct and portfolio investment plus employee
compensation.
(iv) Current transfers – are one-way transfers between countries e.g. remittances, gifts, grants
and pensions. [5]
NB: Sum of 1 to 4 = Current Account Balance
(b) Capital Account [Capital/Financial Account]
Measures all international economic transactions of financial assets, and is divided into two
major components, the Capital Account and Financial Account.
The Capital Account (which is a recent innovation by the IMF) comprises of capital transfers
related to the purchase and sale of fixed assets such as real estate.
The Financial Account is made up of foreign direct investment, portfolio investment and other
short term investments (or financial items)
Shareholding of 10% and above is classified as direct investment. Below that it is portfolio
investment. Purchase and sale of debt securities across borders is classified as portfolio
investment. Capital outflows are recorded as debits while inflows are recorded as credits.
Other investment assets and liabilities comprise of various short-term and long-term trade
credits, cross border loans, currency deposits and bank deposits and other accounts receivables
and payables related to cross border trade. [6]
NB Current Account + Capital Account + Financial Account = Basic Balance
(c) Net Errors and Omissions Account
This ensures that the BOP balances. It is as a result of errors and omissions in collecting data
on international transactions. [2]
NB: A+B+C = Overall Balance
(d) Official Reserves Account
Is the total reserves held by official monetary authorities within the country (gold, forex and
IMF position) [2]
Group 3
1. Merchandise trade balance (or net exports goods):
+100 – 125= - 25
Net exports services:
+ 90 – 80= +10
Net income from abroad (or net factor payments):
+ 110 – 150= - 40
Current account balance: (- 25 + 10 – 40) = - 55
Capital and Financial account balance:
+40 (-160 + 200) + 15 + 55
Net holdings of reserve assets (decrease):
- 100 + 125 – 90 + 80 – 110 + 150 + 160 – 200 = +15
Since CA < 0, country needs to finance its CA deficit. Must borrow from foreigners or
sell to foreigners some of its assets. [12]

2. Role of UNDP in official statistics [8]

 It facilitates project management and provided technical backstopping through Project
Coordinators and its local office staff.
 UNDP also provides administrative inputs through the UNDP Operations sections
(Finance, Human Resources).
 In compliance with its operational framework, UNDP works in close collaboration with
the implementation partner (IP), ZIMSTAT. The key focus of the UNDP is the
development of statistical skills within the IP; hence capacity building for ZIMSTAT
and the NSS is one of the key project components.
 UNDP enables different development partners to participate in project financing by
adopting a pooled and parallel management approaches. UNDP manages e.g. DFID
funds as well as facilitate direct project financing by USAID-SERA and AfDB. This
flexibility in financing arrangements is of great. Pooling of resources also enable
funders without operational relationships with government to participate in project
financing.

Group 4
1. The role of innovation in Official Statistics.
 Helps in sharing of data within, and beyond, government for statistical purposes. [2]
  Helps to overcome legal and bureaucratic challenges through greater use and linkage
of administrative data. [2]
 Can facilitate online Census and enhanced statistics from the Census and improved
statistics between censuses. [2]
 Technology brings new methods of data collection methods and new infrastructure to
collect
 more data electronically e.g. business surveys can be digital by default and the public
can have the option of providing data online. [2]
3 000
2. Machine Index 1997: × 100 = 150
2 000

1 000
2000: × 100 = 50 [3]
2 000

8 000
3. Car Index 1995: 6 000 × 100 = 133.33

9 000
2000: × 100 = 150 [3]
6 000

P Q
4. Paasche Index = (P1 Q1 ) × 100
0 0

($2 ×6 +$1 ×4)

= (($1.85 ×6 +$0.75 ×4)) × 100

$12 + $4
= ( ) × 100
$11.1 + $3
$16
= × 100
$14.1

= 113.5 [6]