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SECTION A: ANWER ALL QUESTIONS ( 40 MARKS )

1. a) Based on Table 1.1, write the formula and calculate the growth in GDP for
2013:
Table 1.1
2012 2013
GDP $110 million $115 million

( 4 marks )

b) Explain the four phases of a business cycle.

( 4 marks )

2. Refer to Table 2.1 to answer the following questions:

Table 2.1
Marginal Propensity to Consumer 0.9 0.8
Initial Change in Spending $50 million $50 million

a. Write the formula and calculate the expenditure multiplier when MPC is
0.9 and 0.8 respectively.
( 3 marks )

b. Write the formula and calculate the change in real GDP when MPC is 0.9
and 0.8 respectively.
( 3 marks )

c. Explain the relationship between MPC and the expenditure multiplier.

( 2 marks )

( 2 mar

3. a. Explain the concept of full employment.

( 2 marks )

b. Discuss three types of unemployment present in an economy during a

recession.
( 6 marks )

DBAS Macroeconomics Set 1 QP E0614

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4. Assume that the economy is initially at full employment. With the aid of an
aggregate demand-aggregate supply diagram, illustrate and explain how a
contractionary fiscal policy affects the price level and real GDP.
( 8 marks )

5. a. List three functions of money.

( 3 marks )

b. Write the formula and calculate the money multiplier when the required
reserve ratio is:

i) 20%
ii) 25%
( 5 marks )

DBAS Macroeconomics Set 1 QP E0614

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SECTION B: ANSWER 3 OUT OF 5 QUESTIONS ( 20 MARKS EACH )

6. Refer to Table 6.1 and answer the following questions:

Table 6.1
Year 2012 2013
($’billion) ($’billion)
Investment 40 35
Government Expenditure 30 25
Consumption 60 65
Net Export Expenditure 50 40
Net Income from abroad 15 10
Net Taxes 5 8
Profits 25 30
* All values shown are at current prices

a. Write the formula and calculate the nominal GDP for 2012 and 2013.
( 5 marks )

b. The price index for 2012 is 100 and the price index for 2013 is 110. Write
the formula and calculate the real GDP for 2012 and 2013.
( 5 marks )

c. Write the formula and calculate the real GDP growth rate for 2013 and
comment on the phase of the business cycle that this economy is in.
( 5 marks )

d. State five possible limitations of using real GDP as a measure of economic

well-being.
( 5 marks )

DBAS Macroeconomics Set 1 QP E0614

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7. a. The number of unemployed persons is 5,000 and the number of employed

persons is 100,000.

i) Write the formula and calculate the numbers in the labour force.
( 3 marks )

ii) Write the formula and calculate the unemployment rate

( 3 marks )

b. An economy is experience inflation due to a rise in wages. With the aid of

an aggregate demand-aggregate supply diagram, illustrate and explain the
type of inflation this economy is facing.
( 7 marks )

c. An economy is experiencing inflation due to an improvement in consumer

and business confidence. With the aid of an aggregate demand-aggregate
supply diagram, illustrate and explain the type of inflation this economy is
facing.
( 7 marks )

8. a. Discuss three factors that will increase the long-run aggregate supply.
( 6 marks )

b. Assuming that an economy is initially at full employment. With the aid of

an aggregate demand-aggregate supply diagram, illustrate and explain the
impact of each of the following events on the price level and real GDP
(Note: Treat each event separately):

i) There is an increase in the prices of raw materials.

( 7 marks )

ii) There is a fall in income taxes.

( 7 marks )

DBAS Macroeconomics Set 1 QP E0614

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9. The Central Bank decides to purchase government bonds.

a. Is this an expansionary or contractionary monetary policy? Explain two

other monetary tools the government can use to achieve the same objective.
( 6 marks )

b. With the aid of a money market diagram, illustrate and explain the impact
of this policy on interest rate.
( 6 marks )

c. Assume that the economy is initially at full employment. With the aid of an
aggregate demand-aggregate supply diagram, illustrate and explain the
impact of this policy on the economy’s price level and real GDP.
( 8 marks )

10. a. With the aid of exchange rate diagram, illustrate and explain the impact that
each of the following events will have on Singapore’s exchange rate (Note:
Treat each case separately):

i) There is an increase in imports.

( 5 marks )

ii) There is an increase in exports.

( 5 marks )

b. With the aid of diagrams, illustrate and explain how government could use
import tariff and import quota to restrict trade.
( 10 marks )

END OF PAPER

DBAS Macroeconomics Set 1 QP E0614