BA0508 Economics Exam Paper (2020/2021 Semester 1)

MCQ (ignore – topic 1 to 5 not tested)

11(a)
TP TVC TFC TC AFC AVC MC
1 55 40 95 40 55 -
2 75 40 115 20 37.5 20
3 90 40 130 13.33 30 15
4 110 40 150 10 27.5 20
5 135 40 175 8 27 25
6 170 40 210 6.67 28.33 35

11(b)(i) $35
11(b)(ii) Total revenue $210, Total profit = $210 – $210 = $0. Type of profit earned is
normal profit.
11(c) The firm will stay in the production because the firm is making normal profit.
11(d)
In a perfectly competitive industry, with weak barriers to entry, economic profits will attract
newcomers while economic loss will push loss making firms out, until all firms in the
industry are making normal profit. ABC is a perfectly competitive firm, it will continue to
make normal profit in the long run.

12(a)(i) LFPR = 92.78% (Write formula and workings)

12(a)(ii) Unemployment rate = 6.67%
12(a)(iii) Nominal GDP per capita = $2000
12(a)(iv) Real GDP 2019 = $9.09 M
12(a)(v) Economic growth rate 2019 = 1.01%

12(b)
 Cost of production for firms increase > AS curve shifts leftwards > Price level increase >
cost-push inflation.
 Draw AD/AS diagram.

12(c)
 Nominal GDP values goods and services at current year market prices. Changes in
nominal GDP can be due to changes in the prices or change in output or both.
 Real GDP values goods at constant year prices. Any change in real GDP is due to change
in output. Real GDP is a better measure of standard of living compared to nominal GDP.
2020/2021/S1
13(a) Refer to lecture notes for the 3 limitations of the specific time lags.
13(b)(i) The government should increase expenditure by $40m. (Provide formula and
workings.)
13(b)(ii) The government should decrease tax by $50m. (Provide formula and workings.)
13(c)
 ↓RRR
 Bank’s ER ↑
 Lending ↑
 Money multiplier process initiate
 MS ↑
 r↓
 C, I ↑
 AD ↑
 Y ↑ by a multiple
13(d) 85% of TD = $100m,
RR = 15% of TD = 100 / 0.85 x 0.15 = $17.647m or $17.65m.

14(a)
 Supply of Indian rupee (INR) increases; the supply curve shifts right from S0 to S1.
 Demand of Indian rupee (INR) decreases; the demand curve shifts left from D0 to D1.
 Given the rightward shift of the supply curve and leftward shift of the demand curve, INR
will depreciate (from p0 to p1 against the U.S. dollar).
 Draw a diagram in the market for Indian rupee (INR).

14(b)(i) Credit, financial account

14(b)(ii) credit, financial account

14(c) Provide answer in tabular format (refer to tutorial.)

(i) Balance on current account = -$420b
(ii) Net debt forgiveness = -$3b
(iii) Balance on capital account = -$3b
(iv) Balance on financial account = $423b

2020/2021/S1