UNIVERSITY OF BOTSWANA

DEPARTMENT OF DISTANCE EDUCATION

ASSESSMENT: ASSIGNMENT ONE

COURSE CODE: ECO 212 DUE DATE: 03 SEPTEMBER 2022

TITLE OF THE PAPER: INTERMEDIATE MICROECONOMICS

SUBJECT: ECONOMICS DURATION OF ASSIGNMENT: 2 WEEKS

SUBMIT: Completed Typed Assignment should be submitted to mokgelea@ub.ac.bw or

amokgele@gmail.com
OR hand delivery should done at CCE on the 3rd September 2022 from 0900am-1030am

INSTRUCTIONS:

1. ANSWER ALL.

2. The question paper carries a total of 60 marks

3. Show all the supporting work & Formulae

4. Give your answers to 2 decimal places where appropriate.

No. of Pages 5 (Including Cover Page)

1. What are the Goals of Macroeconomic Policy? [8 marks]

2. Discuss the short comings of GDP in computing national statistics [10 marks]

3. Thabo consumes only apples. In year 1, red apples cost P1 each, green apples cost P2 each, and
Thabo buys 10 red apples. In year 2, red apples cost P2, green apples cost P1, and Thabo buys
10 green apples.

a. Compute a consumer price index for apples for each year. Assume that year 1 is the base year in
which the consumer basket is fixed. How does your index change from year 1 to year 2? [2 marks]

b. Compute Thabo’s nominal spending on apples in each year. How does it change from year 1 to year
2? [3 marks]

c. Using year 1 as the base year, compute Thabo’s real spending on apples in each year. How does it
change from year 1 to year 2? [3 marks]
.

d. Defining the implicit price deflator as nominal spending divided by real spending, compute the deflator
for each year. How does the deflator change from year 1 to year 2? [2 marks]

4. Using the information given below,

a. what is the value of GDP in millions of Pula, using the income approach? [6 marks]
Transfer Payments P54
Interest Income P150
Depreciation P36
Wages P67
Gross Private Investment (I) P124
Business Profits P200
Indirect Business Taxes P74
Rental Income P75
Net Exports (X-M) P18
Net Foreign Factor Income P12
Government Purchases (G) P156
Household Consumption (C) P304

b. Verify the answer above using the expenditure approach. (4 marks)

5. Discuss the Three (3) Approaches to measuring the GDP [6 marks]

6.Compare the classical and Keynesian views on combating a recession. [6 marks]

7. Explain three 3 theories of consumption? [5 marks]

8. Assume a 2-sector economy described by the following model

𝑌 =𝐶+𝐼
𝐶 = 𝑎 + 𝑏𝑌
𝐼 = 𝐼0

Where 𝑎 = 𝑃250 𝑚𝑖𝑙𝑙𝑖𝑜𝑛, 𝑏 = 0.8, 𝐼0 = 𝑃200 𝑚𝑖𝑙𝑙𝑖𝑜𝑛.

Calculate equilibrium levels of income, consumption and saving. [5 marks]

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