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UNIVERSITY OF THE COMMONWEALTH CARIBBEAN

DEPARTMENT OF BUSINESS ADMINISTRATION

END OF SEMESTER ASSESSMENT/2022 (ONLINE)

 FALL  SPRING  SUMMER

For Marker’s use only

CENTRE : ONLINE
Question # Marks
MODULE : ECN201 PRINCIPLES OF MACROECONOMICS
1 [CLO 5]
DATE : APRIL 20, 2022
2 [CLO 4]
TIME : 6:00PM
3 [CLO 3]
DURATION : 2 HOURS
Total Marks (60)
STUDENT ID #:
Total (40%)

INSTRUCTIONS:

1. Please read all instructions carefully before attempting any question.

2. This paper consists of THREE (3) questions.
3. PLEASE DOWNLOAD AND SAVE THIS FILE WITH YOUR ID NUMBER.
COMPLETE YOUR ANSWERS IN THE SAVED DOCUMENT.
Diagrams, charts, illustrations and tables where applicable, can be drawn in pencil, a high resolution
photo taken and imported into the document.
4. Quantitative computations may be done by inserting a table or using Microsoft Excel and then
importing into the document.
5. PLEASE ANSWER ALL QUESTIONS.
6. This paper represents 40% of your total grade.
7. Total Marks on this paper is [60].
8. Please ensure that you number your questions correctly.
9. Write clearly the number of the question being answered on each of the additional pages.
10. Where questions have multiple parts, all parts must be answered.
11. PLEASE UPLOAD THE COMPLETED MICROSOFT WORD DOCUMENT ONLY,
BEFORE THE END OF THE ASSESSMENT PERIOD.
Write your REGISTRATION NUMBER clearly on each page of your attachments.
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ACADEMIC INTEGRITY

You will be charged with plagiarism if you:

❖ Copy from published sources, including the internet.

❖ Purchase a pre-written paper (either by mail or electronically).

❖ Let someone else write this paper for you.

❖ Reproduce someone else’s assessment paper.

❖ Submit as your own, someone else’s unpublished work, either with or

without permission.

Consequences of Plagiarism
❖ If the final work you submit—all of it—is not yours, it does not matter how
you came by it. Charges of plagiarism are brought to the attention of Academic
Affairs, which initiates an investigation that may lead to formal charges.

❖ The process for the investigation and adjudication of charges may be

accessed at the Dean of Undergraduate Studies Office.

❖ Plagiarism is a serious offense that can result in a variety of sanctions (for

example, failure of the course in which the plagiarism occurred and
suspension from UCC among them).

THERE SHOULD BE NO COLLABORATION AMONG STUDENTS ABOUT

THIS ASSESSMENT.

EVIDENCE OF COLLABORATION (INCLUDING SHARED TEMPLATES)

WILL RESULT IN A SCORE OF ZERO FOR THE ASSESSMENT.
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SECTION A: QUESTION 1 - CLO 5 (20 marks)

READ THE CASE SCENARIO AND ANSWER THE QUESTIONS THAT FOLLOW

Hanna wants Jamaica to promote international trade policy

Thursday, April 22, 2021
BY ALPHEA SAUNDERS
EXCERPT …OPPOSITION spokesperson on foreign affairs and foreign trade Lisa
Hanna is urging the Government to join hands with the Opposition and the private
sector to seek growth solutions by pushing a foreign policy which focuses on economic
development.

Hanna, in her 2021/22 sectoral debate presentation in the House of Representatives Tuesday,
said the best way to do this is to promote international trade policy through proactive
approaches.

“In other words, it's time for Jamaica to seize the economic growth solutions global trade has
made available to us. Good things don't come to those who wait but to those who get up and
get them,” she stated.

The St Ann South Eastern Member of Parliament pointed to value-added agriculture, which
she said would benefit small farmers and, by extension, the economy. “The growth of several
developing countries is propelled by agricultural exports. In Jamaica we are increasingly
dependent on food imports while not realizing our potential for exports. Instead, the
prevailing policy has resulted in reduced exports, no rationale in crop selection, price
instability for farmers and consumers, little or no cold storage, little or no secondary
processing of primary produce, no new technology, and we still end up dumping more than
30 per cent of our small farmer's production due to a mismatch between demand and
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supply. She pointed out that work was previously started by the PNP Administration to
advance trade relations with China…..

(a) Describe the term ‘International Trade’. (2 marks)

International trade can be described as the exchange or trade of goods and services between
different nations Consumer goods, raw materials, food, and machinery all are bought and sold in the
international marketplace. This kind of trade contributes and increases the world economy. 

(b) With specific reference to the case, and theories learned, outline TWO (2) reasons
why it is important to promote international trade policy. (4 marks)

To end poverty worldwide, trade is essential. Open economies tend to develop more quickly,
innovate, increase productivity, and give their citizens more chances and higher incomes. By
providing consumers with more cheap goods and services.
Economic Growth.  trade policies can increase the productive capacity of an economy; it can
enhance technological diffusion and it can also expand product market. Trade and global value
chains help to drive economic growth and eliminate poverty by integrating with the global
economy.
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According to the case, Opposition and the private sector should seek growth solutions by
pushing a foreign policy which focuses on economic development. Briefly describe and
give examples of any TWO (2) trade restriction policies that can Lower prices for
consumers

A barrier to trade is a government-imposed restraint on the flow of international goods

or services. Those restraints are sometimes obvious, but are most often subtle and non-
obvious.

The most direct barrier to trade is an embargo– a blockade or political agreement that limits
a foreign country’s ability to export or import. Embargoes still exist, but they are difficult to
enforce and are not common except in situations of war.

The most common barrier to trade is a tariff–a tax on imports. Tariffs raise the price of
imported goods relative to domestic goods (good produced at home). Tariffs increase the
price of imported goods, making domestic goods cheaper in comparison.

Another common barrier to trade is a government subsidy to a particular domestic industry.

Subsidies make those goods cheaper to produce than in foreign markets. This results in a
lower domestic price. Both tariffs and subsidies raise the price of foreign goods relative to
domestic goods, which reduces imports.
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(c) Explain how any of the trade restriction policies discussed above may impede/ impact
the trading relationship between Jamaica and China (2 marks)
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(d) Lisa Hanna pointed out that work was previously started by the PNP Administration
to advance trade relations with China. However, there are many who disagree that
trade is always beneficial to the trading countries. Discuss any TWO (2) arguments
against free trade and TWO (2) arguments in favour of free trade. (8 marks)

ARGUMENTS AGAINST FREE TRADE

Job outsourcing leads to unemployment

 
Free trade allows businesses to relocate production to a cheaper location. When labor or
production costs are high in a country, many people lose their jobs as production is
outsourced to cheaper locations. Furthermore, companies in previously subsidized sectors are
frequently unable to compete with global firms as markets become flooded with cheaper
goods.

Free trade is bad for the environment

Production requires the use of resources, and through free trade, businesses gain access to the
natural resources of other countries. In "less developed" countries, strong environmental
protection laws are frequently lacking, allowing companies to use environmentally harmful
and unsustainable harvesting methods such as clearcut logging. The ruthless exploitation
depletes resources, which has serious long-term negative effects on the local environment. It
also implies that the resources are no longer available to the local population, resulting in
negative economic consequences.
ARGUMENTS FOR FREE TRADE
 Increased Economic Growth

A free trade agreement opens up a wider market for companies to sell their products. By specializing
in the things their countries excel at rather than producing everything needed within their borders,
countries can import things that would cost them a lot to produce instead of producing everything.
In this way, productivity is increased and the economies of the trading countries grow

Lower prices for consumers

Free trade means that global competition can enter the local market, leading to more options
on the shelves for consumers and in many cases to lower prices. When trade barriers exist,
foreign suppliers have a hard time selling their goods on the local market, since their taxes
are far higher than those of local competitors. However, when barriers are removed, foreign
suppliers can sell goods at similar conditions to local suppliers, which increases the
competition for customers in the market and causes prices to drop. Sometimes, foreign
companies can produce goods at a much lower cost than local ones, which means that
consumers now have much cheaper options to buy.
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SECTION B: ANSWER ALL QUESTIONS [40 marks]

QUESTION 2- CLO 4 (20 marks)
a) Define the following terms in your own words:

Monetary Policy refers to a central bank's objectives in managing money, interest

rates, and credit conditions.

Fiscal policy involves the use of government spending and taxation to influence the
economy. Government typically use fiscal policy to promote strong and sustainable
growth and reduce poverty

Economic Growth.

Economic growth is an increase in the production of economic goods and services
over time.

(6 marks)

b) Describe two (2) types of inflation. (4 marks)

Demand-pull inflation occurs when aggregate demand for goods and services in an
economy rises more rapidly than an economy's productive capacity. One potential
shock to aggregate demand might come from a central bank that rapidly increases the
supply of money.

Cost-push inflation, on the other hand, occurs when prices of production process
inputs increase. Rapid wage increases or rising raw material prices are common
causes of this type of inflation. 

c) How can fiscal policy be used to address the problem of a recession

or economic slowdown?
Recessions are fixed by expanding fiscal policy. In order to contract the
economy, fiscal policy decreases aggregate demand, which will lead to lower output,
higher unemployment, and a lower price level. (5 marks)

d) How can monetary policy be used to increase output in an economy? (5 marks)

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Expansionary monetary policy involves a central bank buying Treasury notes, decreasing
interest rates on loans to banks, or reducing the reserve requirement. All of these actions
increase the money supply and lead to lower interest rates  lowers the cost of borrowing,
resulting in higher investment activity and the purchase of consumer durables. which leads to
increasing in output on the economy
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QUESTION 3 - CLO 3 (20 marks)

a) Explain the “multiplier” concept and show how it is calculated. (2 marks)

b) Assume that you are aware that the Jamaican economy’s investment multiplier is 4;

i) Calculate the value of the marginal propensity to consume (MPC). (2 marks)

ii) By how much would the equilibrium GDP change with the injection of $200m?
(1 mark)

iii) Given your response to part (ii), show in tabular form the cumulative spending
increase after five “rounds” of spending. (5 marks)

c) If the MPC of the economy is adjusted to 0.5, what would be the new value of the
multiplier? (1 mark)

d) Define the following terms in your own words:

Business cycle

A business cycle is a model showing the increase and decrease in a nation’s real GDP
overtime: This model typically demonstrates an increase in real GDP over the long run,
combined with short -run fluctuation in output.

Recession

A recession refers to a period of times during which the total output (real GDP) of an
economy declines. A period during which production falls and is associated with job
losses (unemployment increases)

Depression

An Economic Depression is a long period during which the economy doesn’t grow and
unemployment remains very high. We often refer to its simply as depression. It serves
and longer than a recession

Expansion is the phase of the business cycle where real GDP domestic product (GDP)
grows for two or more consecutive quarters, moving from a through a peak
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Peak

The turning point in Business Cycle between an expansion and a contraction during a
peak in the business cycle, output has stopped increasing and begins to decrease.

Trough

The turning point in business cycle between a recession and an expansion during a trough in
the business cycle, output that had been falling during the recession stage of the business
cycle bottoms out and begins to increase again.

Draw a well-labelled business cycle diagram (3 marks)

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UNIVERSITY OF THE COMMONWEALTH CARIBBEAN

DEPARTMENT OF BUSINESS ADMINISTRATION

END OF SEMESTER ASSESSMENT/2022 (ONLINE)

 FALL  SPRING  SUMMER

CENTRE : For Marker’s use only

Question # Marks
MODULE : ECN201 PRINCIPLES OF MACROECONOMICS 1 (CLO 4)
2 (CLO 5)
DATE : AUGUST 04, 2022
3 (CLOs 2, 3)
TIME : 6:00PM Total (65)
Total (40%)
DURATION : 2 HOURS

STUDENT ID #:

INSTRUCTIONS:

12. Please read all instructions carefully before attempting any question.
13. This paper consists of THREE (3) questions.
14. PLEASE DOWNLOAD AND SAVE THIS FILE WITH YOUR ID NUMBER. COMPLETE
YOUR ANSWERS IN THE SAVED DOCUMENT. Diagrams, charts, illustrations and tables
where applicable, can be drawn in pencil, a high resolution photo taken and imported into the
document.
15. Quantitative computations may be done by inserting a table or using Microsoft Excel and then
importing into the document.
16. PLEASE ANSWER ALL QUESTIONS.
17. This paper represents 40% of your total grade.
18. Total Marks on this paper is [65].
19. Please ensure that you number your questions correctly.
20. Write clearly the number of the question being answered on each of the additional pages.
21. Where questions have multiple parts, all parts must be answered.
 Page 14 of 30

22. PLEASE UPLOAD THE COMPLETED MICROSOFT WORD DOCUMENT ONLY, AT THE END
OF THE ASSESSMENT PERIOD.
Write your REGISTRATION NUMBER clearly on each page of your attachments.
 Page 15 of 30

ACADEMIC INTEGRITY

You will be charged with plagiarism if you:

❖ Copy from published sources, including the internet.

❖ Purchase a pre-written paper (either by mail or electronically).

❖ Let someone else write this paper for you.

❖ Reproduce someone else’s assessment paper.

❖ Submit as your own, someone else’s unpublished work, either with or

without permission.

Consequences of Plagiarism
❖ If the final work you submit—all of it—is not yours, it does not matter how you
came by it. Charges of plagiarism are brought to the attention of Academic
Affairs, which initiates an investigation that may lead to formal charges.

❖ The process for the investigation and adjudication of charges may be accessed
at the Dean of Undergraduate Studies Office.

❖ Plagiarism is a serious offense that can result in a variety of sanctions (for

example, failure of the course in which the plagiarism occurred and suspension
from UCC among them).

THERE SHOULD BE NO COLLABORATION AMONG STUDENTS ABOUT THIS

ASSESSMENT.

EVIDENCE OF COLLABORATION (INCLUDING SHARED TEMPLATES) WILL

RESULT IN A SCORE OF ZERO FOR THE ASSESSMENT.
 Page 16 of 30

PLEASE ATTEMPT ALL QUESTIONS

SECTION A: PLEASE READ THE SCENARIO AND ANSWER ALL QUESTIONS

QUESTION 1 – (15 marks) CLO 4

SCENARIO: Shrinkflation hits package sizes

Daily Gleaner -Published: Friday | June 10, 2022 | 12:08 AM

Bottles of Gatorade are pictured, a 32 fluid ounce and a 28 fluid ounce, on June 6.

It’s the inflation you’re not supposed to see. From toilet paper to yoghurt and coffee to corn
chips, manufacturers are quietly shrinking package sizes without lowering prices. It’s dubbed
‘shrinkflation’, and it’s accelerating worldwide.

In the United States, a small box of Kleenex now has 60 tissues; a few months ago, it had 65.
Chobani Flips yoghurts have shrunk from 5.3 ounces to 4.5 ounces. In the United Kingdom,
Nestlé slimmed down its Nescafe Azera Americano coffee tins from 100 grams to 90 grams. In
India, a bar of Vim dish soap has shrunk from 155 grams to 135 grams.

Shrinkflation isn’t new, experts say. But it proliferates in times of high inflation as companies
grapple with rising costs for ingredients, packaging, labour and transportation. Global consumer
price inflation was up an estimated seven per cent in May, a pace that will likely continue
through to September, according to S&P Global.
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“It comes in waves. We happen to be in a tidal wave at the moment because of inflation,” said
Edgar Dworsky, a consumer advocate and former assistant attorney general in Massachusetts
who has documented shrinkflation on his Consumer World website for decades. Dworsky said
shrinkflation appeals to manufacturers because they know customers will notice price increases
but won’t keep track of net weights or small details, like the number of sheets on a roll of toilet
paper.

###

a. According to the case, global consumer price inflation was up an estimated seven per
cent in May. Outline TWO (2) monetary policies and TWO (2) fiscal policies that
can be used fight this inflation and mitigate the effects of “shrinkflation.” (8
marks)
Two monetary policies to fight inflation are contractionary and expansionary
Contractionary monetary policy: By selling government bonds increasing interest rates
and raising bank reserves this policy reduces the quantity of money that is in circulation
throughout the economy the government uses this policy to avoid inflation
Expansionary monetary policy: This policy can raise the amount of money in the
economy by lowering interest rates, reducing the amount of reserve the bank must hold,
and having central banks buy government assets
Two fiscal policies to fight inflation are
Contractionary fiscal policy: Through either raising tax rates, cutting spending or both the
government collects more revenue than it spends. When the economy is growing this
kind of fiscal policy should be employed.
Expansionary fiscal policy: When a central bank employs this policy it helps to booast
the economy by the availability of money bringing down interest rates and raising
demands. It promotes economic expansion and reduces the currency’s worth which
decreases the exchange rates.

b. Explain the concept of Automatic Stabilizers, citing TWO (2) examples. (4 marks)
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The concepts of Automatic stabilizers are components of government budgets that,

without the approval of lawmakers increases or lower taxers when the economy weakens
and two examples are:
1) Corporate and individual income taxes that are graduated progressively
2) Transfer schemes such as welfare, stimulus checks,

c. Explain how any ONE (1) of the examples of automatic stabilizers cited in (b) above can
contribute to economic growth. (3 marks )

Corporate and individual income taxes are graduated progressively. This means that they
are set in proportion to the taxpayer’s level of income
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SECTION B: COMPULSORY [50 marks]

QUESTION 2 (22 marks) CLO 5

International trade allows a country to focus on the good/service that it produces best and trade
for what it is unable to produce. This allows a country to specialize in certain goods, which leads
to more efficient production. An example of this, is where Guyana may concentrate its resources
at producing rice which it does best and Jamaica may focus on producing bananas which it is
able to use few resources to produce and produce at a lower opportunity cost.

When each country specializes in what it does best, each country has more to trade. In other
words, as both countries take advantage of their strengths, both countries increase their overall
economic well-being. This improves world trade.

###

a. Based on the scenario given and previous knowledge, identify two (2) benefits of
international trade.
The benefits of international trade are
1) Making good relations between countries
2) Increase the prosperity of a country
(4 marks)

b. Differentiate between absolute and comparative advantages, using examples to support

your response. (4 marks)
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Absolute advantage is the ability of an individual, company, region, or country to produce a

greater quantity of a good or service with the same quantity of inputs per unit of time, or to
produce the same quantity of a good or service per unit of time using a lesser quantity of
inputs, than its competitors. For example, if Japan and Germany can both produce cars,
but Germany can produce sports cars of a higher quality and at a faster rate with
greater profit, then Germany is said to have an absolute advantage in that particular
industry.
While comparative is the advantage is an economy's ability to produce a particular good or
service at a lower opportunity cost than its trading partners. if a country is skilled at making
both cheese and chocolate, they may determine how much labor goes into producing
each good. If it takes one hour of labor to produce 10 units of cheese and one of of labor
to produce 20 units of chocolate, then this country has a comparative advantage in
making chocolate.

c. Describe two (2) benefits a country derives from specialization. (4 marks)

Two benefits of a country derive from specialization

1) Higher pro` ductivity and efficiency

2) Lower units costs leading to higher profit.
Opportunity for Competitive Sectors; Firms gain access to the whole market
which allows them to grow bigger and to benefit further from economies
scales
Consumer benefits: Specializations means that opportunity for production is
lower, which means that globally more goods are produced and at a lower
cost. Consumers benefit from lower prices and greater quantity.
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d. Outline two (2) arguments for and two (2) arguments against free trade. (10 marks)

for free trade

Job outsourcing leads to unemployment

 
Free trade allows businesses to relocate production to a cheaper location. When labor or
production costs are high in a country, many people lose their jobs as production is outsourced to
cheaper locations. Furthermore, companies in previously subsidized sectors are frequently unable
to compete with global firms as markets become flooded with cheaper goods.

Free trade is bad for the environment

Production requires the use of resources, and through free trade, businesses gain access to the
natural resources of other countries. In "less developed" countries, strong environmental
protection laws are frequently lacking, allowing companies to use environmental harmful It also
implies that the resources are no longer available to the local population, resulting in negative
economic consequences.

ARGUMENTS FOR FREE TRADE

 Increased Economic Growth

A free trade agreement opens up a wider market for companies to sell their products. By
specializing in the things their countries excel at rather than producing everything needed within
their borders, countries can import things that would cost them a lot to produce instead of
producing everything. In this way, productivity is increased and the economies of the trading
countries grow
 Page 24 of 30

Lower prices for consumers

Free trade means that global competition can enter the local market, leading to more options on
the shelves for consumers and in many cases to lower prices. When trade barriers exist, foreign
suppliers have a hard time selling their goods on the local market, since their taxes are far higher
than those of local competitors. However, when barriers are removed, foreign suppliers can sell
goods at similar conditions to local suppliers, which increases the competition for customers in
the market and causes prices to drop. Sometimes, foreign companies can produce goods at a
much lower cost than local ones, which means that consumers now have much cheaper options
to buy.
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Page 26 of 30
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QUESTION 3 (28 marks) CLOs 2 & 3

CLO 2
a) Using a well-labelled diagram, explain what happens when an economy experiences GDP
growth. (5 marks)
AS AS
A

B
GDP
rises

AD

Faster economic growth increases the size of the economy overall and improves the
budgetary condition

b) Consider an economy described by the following parameters:

C=1000+0.8Yd
I=1300
G=2000
X= 600
M =100
T=1000
Where: G is government expenditure, X is exports, M is imports, I is the level of planned
investment, T are lump-sum taxes on income, C is household consumption and Yd is
disposable income.
i. What will be the value of the equilibrium GDP in the economy above?
(6
marks)

ii. Calculate the value of the multiplier. (2 marks)

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iii. Is the economy experiencing a trade deficit or surplus? Explain your response.
A trade deficit occurs when the value of a country's imports exceeds the value of its exports with
imports and exports referring both to physical goods and services. In simple terms, a trade deficit
means a country is buying more goods and services than it is selling. Surplus: the amount by
which your income is greater than you’re spending. 
(2 marks)

CLO 3
c) Outline the three (3) methods of national accounting.
Three are three national methods
1) Production method
2) Income method
3) Expenditure method (6 marks)
Give a clear guide as to how each method is calculated.
1) The production method is calculated by dividing the outputs produced by the inputs used in
the production method
2) The income method is calculated by adding yp the pretax income generated by individuals and
companies in the economy
3) Expenditure income is calculated by summing up all the expenditures made on the final goods
and services

d) Illustrate what happens during a “boom” and a “recession” using a diagram of a simple
business cycle.
(7 marks)
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END OF ASSESSMENT
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END OF ASSESSMENT