ECO121 Macroeconomics

Class:
Term: Spring 2020
Handed out:
Submission due:
Format: .pdf file
Submission mode: Hardcopy and Softcopy
Email to: tamnt2@fsb.edu.vn
tamnt@fpt.edu.vn

Student Information
Name: TRƯƠNG THIÊN THẢO HẠNH Roll number: HS140396
Room No: Class: Ba1405

FOR TEACHER ONLY

MARK MARKED BY Signature of Proctor
(NAME AND SIGNATURE)

Assignment 2
Question1:

Assume that in the Economy only two goods are produced: Pencils and Erasers. Macroeconomics
information for this economy is given in the below
a. What is the value of Nominal GDP in 2011 and 2012? What is the percentage increase?
b. What is the value of Real GDP in 2011 and 2012, by considering 2011 as the base year? What is
the percentage increase?
c. What is the value of the GDP deflator in the two years? By what percentage does the price level
change from the base year to 2012?
d. Was the increase in Nominal GDP due more to an increase in prices or in the volume of output?
e. What was the growth rate of average labour productivity for the whole economy between 2011
and 2012?

2011 2012
Output (Pencils) 100 110
Output (Erasers) 200 220
Employment (Pencils) 500 600
Employment (Erasers) 500 500
Price per Pencil $1.00 $1.50
Price per Eraser $1.00 $1.10

Question 2:

Identify and discuss factors that affect both Net Export and Net Capital Outflow

Question1:

Assume that in the Economy only two goods are produced: Pencils and Erasers. Macroeconomics
information for this economy is given in the below

a. What is the value of Nominal GDP in 2011 and 2012? What is the percentage increase?

Nominal GDP in 2011=100*$1.00+200*$1.00=$300.

Nominal GDP in 2012=110*$1.50+220*$1.10=$407.
Percentage increase= (($407-$300)/$300) *100%=35.6%
b. What is the value of Real GDP in 2011 and 2012, by considering 2011 as the base year?
What is the percentage increase?

Real GDP in 2011=$300.

Real GDP in 2012=110*$1.00+220*$1.00=$330.
Percentage increase= (($330-$300)/$300)*100%=10%
c. What is the value of the GDP deflator in the two years? By what percentage does the price level
change from the base year to 2012?
GDP Deflator in 2011= ($300/$300)*100=100
GDP Deflator in 2012= ($407/$330)*100=123.3.

c. Was the increase in Nominal GDP due more to an increase in prices or in the volume of
output?
Increasing in Nominal GDP due more to an increase in prices because Nominal GDP values
output using current prices.
d. What was the growth rate of average labour productivity for the whole economy between
2011 and 2012?

Productivity in 2011= $300/1000=0.3

Productivity in 2012=$330/1100=0.3
The growth rate of average labor productivity for the whole economy between 2011 and
2012 is 0%.
 2011 2012

Output (Pencils) 100 110

Output (Erasers) 200 220
Employment (Pencils) 500 600
Employment (Erasers) 500 500
Price per Pencil $1.00 $1.50
Price per Eraser $1.00 $1.10

Question 2:

Identify and dícuss factors that affect both Net Export and Net Capital Outflow

Some factors that affect both Net Export and Net Capital Outflow (domestic country is the USA)
are:
• Price
-When P rise -> r rise -> S rise and I decrease -> NCO decrease -> the value of dollar increase ->
import increase & export decrease, so NX decrease
• The tastes of consumers for domestic and foreign goods
- Affect on export and import of a country  If the consumers prefer foreign goods than
domestic goods, the government of that country has to import those goods. It may lead to
trade deficit. That thing is not good for the country.
• The exchange rates at which people can use domestic currency to buy foreign currencies
- Decide how much money people will change from domestic currency to foreign currencies
foreigners want to invest in domestic have to decide they can invest how much and that
can exchange how much or contrast.
• The incomes of consumers at home and abroad
-The prices and the quality of the goods are two main factors the consumers will judge to decide.
Besides that, they also consider about their incomes to decide.
• The costs of transporting goods
-If the costs is too high  import and export can decrease
• The policies of the government toward international trade
-If the policies is not easy, the import or export can be prevented and face the difficulties.
4/2