ECO 502: Individual Assignment#2 for all

(Hand written, for preparation of the Final Exam: Spring 2020)

Solve the below questions and submit prior final exam.

1). Define labor force of a country, and who are not eligible to work? How do we calculate the employment rate and the
natural rate of unemployment (NRU)? How economists define “Full Employment”? Describe in details the
unemployment types. The Okun’s Law indicates what? Give example.
2). What do you mean by inflation and how to measure inflation rate? Write the types of Inflation as per rate. What are
the causes of demand up? Explain the “Demand-pull” & “Cost-push” inflations.
3). Write the major objectives of stabilization policy. What are the important and widely used economic policies to
achieve economic stability? Explain the traditional monetary instruments through which a central bank carries out
the monetary policies?
4). What is Fiscal Policy? What is deficit and how the deficit is met? A counter-cyclical fiscal policy would require what?
What are the possible offsets to fiscal policy? Draw a Laffer Curve.
5). Why does the government need revenue? Where does the revenue come from? Where does the government keep
revenue? What are the public expenditure types? For what to spends?
6). How does spending help? Explain the multiplier effect and the crowding-out effect. What are the MPC and MPS in
Multiplier Effect? Explain with example.
7). Write the reasons behind and basic assumptions of international trade. Give comparative example of the groups of
countries regarding “land, labor & capital” factors relationship.
8). Explain with example the absolute cost advantage theory in international trade. International trade will not possible in
equal costs difference of two commodities, explain.
9). Explain with example of the “Comparative Cost Advantage” theory in international trade.
10). Explain with example the “Factor-Endowment Theory”. What is “Leontief Paradox”?
11). Explain the Product-cycle theory and the Diamond theory. Write the differences of two theories.
12). Describe the types of market participants. What is balance-of-payments (BOP) in International Trade? A BOP
statement can be broken down into various components. Explain those.
Special questions (Other than Textbook/Creative)
 Explain, why the World Bank & IMF think Bangladesh now is on strong footing of development? As of Asia
Foundation, Bangladesh’s Development Surprise: A Model for Developing Countries. Why? Why UN’s ECOSOC
recognized our country as developing one?
 Explain why Bangladesh entered into Lower Middle Income country group? What are the future challenges for
sustainable economic growth of Bangladesh? As of Ruling Party, the country would be Middle Income one by 2021,
what do you think? Give logics in favor of your answer. How about our country to be in developed countries group?
Explain.
 There was a conspiracy to stop the funding of the Padma Bridge by the World Bank & allied global lenders.
Justify.

Problem Solving (Exercise)

 If the MPC is 0.75 & govt. increases spending by Tk20 billion for social safety net, then show the 3 rounds spending and
calculate the MPC.
 If an economy's Disposable Income (DI) & Consumption (C) schedule are as:
GDP=DI 6600 6800 7000 7200 7400 7600 7800 8000
C 6680 6840 7000 7160 7320 7480 7640 7800
Then answer the following: a). If DI were $7400, how much would be saved? b). What is the "break-even" level of DI? c). What is
this economy's MPC? d). What are the average propensity to consume when DI are respectively $7000 and $8000?
 Suppose a $100 increase in desired investment spending ultimately results in a $300 increase in real GDP. Then a).What is the
size of the multiplier? b).If the MPS is .4, what is the multiplier? c).If the MPC is .75, what is the multiplier? d). If investment
spending initially increases by $50 billion in an economy with MPC 2/3 then how much will this ultimately change in real GDP?
 Describe comparative cost advantage position in trade for the provided case:
Country Commodity- X Commodity– Y
A 10 10
B 6 8