ECON 1013 MACROECONOMICS (2019 Semester 3)

FACULTY OF BUSINESS AND MANAGEMENT

GROUP ASSIGNMENT

Subject Code ECON 1013 Subject Lecturer DR.YASOTHA

& MACROECONOMICS NAIR
Subject Title
Level of Study DIPLOMA Year and Semester 2019/3
Weightage 15% Submission Date 4/11/2019
(Monday) by
12.00pm

MARK SHEET

QUESTION MARKS AWARDED

Question 1 /25

Question 2 /30

Question 3 /10

Question 4 /15

Question 5 /20

Total /100

PREPARED BY:

Name Student ID

PREPARED FOR:

DR.YASOTHA NAIR

SOUTHERN UNIVERSITY COLLEGE, FACULTY OF BUSINESS AND MANAGEMENT -1-

ECON 1013 MACROECONOMICS (2019 Semester 3)

Instruction: Answer ALL the questions in this section. This section carries a total of 100
marks.

QUESTION 1

a) In the term "real GDP," what does "GDP" stand for and what does it measure? What
does "real" indicate? (4 marks)

b) What are the differences between national income, personal income, and disposable
personal income? (5 marks)

Table 1

2011 2015 2016

Product Quantity Price Quantity Price Quantity Price
MP3s 40 $250.00 45 $200.00 50 $150.00
Tacos 2,000 2.00 2,200 2.25 2,300 2.40
Coats 300 50.00 310 52.00 350 55.00

c) Consider the data in table 1 for a simple economy: Using 2011 as the base year,
calculate:
(i) nominal GDP for year 2016 (3 marks)
(ii) real GDP for year 2016. (3 marks)

d) China's current rate of GDP growth is quite rapid. Its current growth rate is probably
three times that of the United States. However, the levels of pollution are much higher
in China. Would you consider China to be better off than the United States given this
information? Why or why not? (10 marks)

[Total: 25 marks]

SOUTHERN UNIVERSITY COLLEGE, FACULTY OF BUSINESS AND MANAGEMENT -2-

ECON 1013 MACROECONOMICS (2019 Semester 3)

QUESTION 2

Referring to the following data and with a proper formula, calculate:

Table 1: Production of Cheese and Cloth

Malaysia's production in 1 day Singapore's production in 1 day

Cloth 8 Cloth 4
Cheese 16 Cheese 12

a) Define absolute advantage and comparative advantage. (6 marks)

b) Which country has the absolute advantage and why? (4 marks)

c) Calculate and identify which country has the comparative advantage in cloth?
(5 marks)

d) Calculate and identify which country has the comparative advantage in cheese?
(5 marks)

e) List down FIVE advantages of International Trade. (5 marks)

f) List down FIVE disadvantages of International Trade. (5 marks)

[Total: 30 marks]

QUESTION 3

The Bureau of Labor Statistics reported the data in the table below for October 2013.

Category Number (millions)

Working age population 222.0
Labor force 146.8
Employment 138.0

Based on the information given:

a) Define the meaning of unemployment (2 marks)
b) Calculate the number of people unemployed. (2 marks)
c) Calculate the number of people who are not in the labor force. (2 marks)
d) Calculate the unemployment rate. (2 marks)
e) Calculate the labor force participation rate. (2 marks)

[Total: 10 marks]

SOUTHERN UNIVERSITY COLLEGE, FACULTY OF BUSINESS AND MANAGEMENT -3-

ECON 1013 MACROECONOMICS (2019 Semester 3)

QUESTION 4

Referring to the following data and with a proper formula, calculate:

Income (Y) Consumption (C)

($) ($)
1000 900
1200 1060

a) Saving (2 marks)
b) Average Propensity Consumption (2 marks)
c) Average Propensity Saving (2 marks)
d) Marginal Propensity Consumption (2 marks)
e) Marginal Propensity Saving (2 marks)
f) In an economy, MPC = 0.75. If investment is increased by $10 crore,
how much would be the increase in income? (2 marks)

g) Given C = 60+0.8Y, and I=60, calculate equilibrium level of income (3 marks)

[Total: 15 marks]

QUESTION 5

The circular flow model in four sector economy provides a realistic picture of the circular
flow in an economy. Four sector model studies the circular flow in an open economy which
comprises of the household sector, business sector, government sector, and foreign sector.
With the aid of a diagram, explain how does the 4 sectors circular flow model works?

[Total:20 marks]

SOUTHERN UNIVERSITY COLLEGE, FACULTY OF BUSINESS AND MANAGEMENT -4-