Individual Assignment ECO121

Your Name: Nguyễn Vương Thụy

Roll Number: CS170631

Chapter 23
A U.S.-owned car factory in Mexico produces $5 million of cars. $2.5 million of these
cars are sold in Mexico and the other $2.5 million are sold in the U.S. In both cases $1
million of the value of the cars was due to U.S-owned equipment located in Mexico
and U.S. managers working in Mexico. How much did this production contribute to
U.S. GDP?

Answers:
Although this production is owned by the US, it is made in Mexico, so it does not
affect US GDP. Because GDP is the total monetary value or market value of all
finished goods and services produced within a country's borders during a particular
period of time. Therefore, this production contribute $0 to US GDP.

Chapter 24
Suppose a basket of goods and services has been selected to calculate the CPI and
2012 has been selected as the base year. In 2012, the basket’s cost was $50; in 2014,
the basket’s cost was $51; and in 2016, the basket’s cost was $52. What was the value
of the CPI in 2014?

Answers:
CPI in 2014 = (The basket's cost in 2014 * 100) / The basket's cost in 2012
= (51 * 100) / 50
= 102
Thus, CPI in 2014 is 102

Chapter 28
In 2015 the Japanese adult non-institutionalized population was 110.7 million, the
labor force was 66 million, and the number of people employed was 63.7 million.
According to these numbers, the Japanese labor-force participation rate and
unemployment rate were about

Answers:
Labor-force participation rate = (Labor force / Population ) × 100
= ( 66,000,000 / 110,700,000 ) × 100
= 59.6 %
Unemployment rate = [(Labor force - Number of people employed) / Labor force ] ×
100
= [ ( 66,000,000 - 63,700,000 ) / 66,000,000 ] × 100
= [ 2,300,000 / 66,000,000 ] × 100
= 3.5%
Therefore, the Japanese labor-force participation rate is 59.6% and The Japanese
unemployment rate is 3.5%

Chapter 25
What are determinants of productivity? How can we improve productivity? Give short
answers.

Answers:
There are four determinants of productivity: 
- Physical capital: the stock of equipment and structures that are used to produce
goods and services.
- Human capital: the knowledge and skills that workers acquire through education,
training, and experience.
- Natural resources: inputs into the production of goods and services that are
provided by nature.
- Technological knowledge: society’s understanding of the best ways to produce
goods and services.
Growth in output per hour of labor can be achieved through three different sources:
- Improvements in the quality of human capital: increased education, work
experience, on-the-job training, and so on.
- Increases in the level of physical capital (machines, factories, etc.) available to
workers allowing it to produce goods and services faster.
- Increases in the level of technological progress: research and development new
and more efficient technologies, production processes and organizational
structures.

Chapter 29
1. What are the differences between M1 and M2?
2. Suppose that reserve requirement ratio is 25% and public hold 1 billion USD,
calculate Money supply?

Answers:
1. M1 includes currency and money in checking account (demand deposit).
Traveler's checks are also a component of M1, but their use is declining. M2
includes all of M1, plus savings, time deposits like certificates of deposit, and
money market funds.
M2 is made up of M1 and other assets that are not directly convertible to cash but it
can be easily converted to cash. Include less liquid assets such as savings and
certificates of deposit.

2. Money multiplier = 4
The maximum possible deposit increase is 4 X $1
Money supply = 3

Chapter 30
1. What are the differences between norminal wage and real wage?
2. The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent.
What is the real interest rate?
Answers:
1. A nominal wage, also called a money wage, is the money you're paid by an
employer for your labor. A nominal wage is not adjusted for inflation. A real
wage is a wage adjusted for inflation. If your nominal wage increases slower
than the rate of inflation, then your purchasing power will decline.

2. The real interest rate = The nominal interest rate - The inflation rate
= 3.5% - 1.5% = 2.0%

Chapter 3

Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.

 Hours Needed to Make 1 Quantity Produced in 2400 Hours

 
Car Airplane Cars Airplanes

Japan 30 150 80 16

Korea 50 150 48 16
Compute Japan and Korea opportunity cost of one airplane ?

Answers:
Japan's opportunity cost of one airplane is 80/16 = 5 cars
Korea's opportunity cost of one airplane is 48/16= 3 cars

Chapter 31
1. Suppose you are American, an Iphone is 999$ in the US and it is 25,000,000
VNĐ in Vietnam. The exchange rate of USD to VND is 23,150. Compute the
real exchange rate.
 2. Last year a country had exports of $50 billion, imports of $60 billion, and
domestic investment of $40 billion. What was its saving last year? Answer:

Answers:
1. Real exchange rate = 0.93

2. Net exports = Exports - Imports

= $50 billion - $60 billion
= -$10 billion
The net exports is -$10 billion.
Net capital outflow = Net exports
Saving - Domestic investment = Net exports
Saving - $40 billion = -$10 billion
Saving = $30 billion
The saving last year was $30 billion.

Chapter 32
3. Suppose the policy makes people decrease their investment. What is the effect
to:
a. Interest rate?
b. NCO?
c. Real exchange rate?
d. NX?

Answers:
Policies that make people less invested work:
a. Interest rate reduction
b. Increase NCO
c. Real exchange rate decrease
d. Increase NX

Chapter 33
3. What things make LRAS to shift?

Answers:
The long-run aggregate supply curve (LRAS) is determined by all factors of
production - the size of the workforce, size of capital stock, levels of education, and
labor productivity. If there was an increase in investment orgrowth in the size of the
labor force this would shift the LRAS curve to the right.

Chapter 34
1. If the real-estate market increases fastly, what will happen to the output? What
should the Government do?
2. What should the Government do in recession?

Answers:
1. Real estate is an intangible asset made up of land and the land to which it fits, and
although it is real property, real estate, like other assets, is subject to supply and
demand. This means that house prices, like stock and bond prices, are highly
dependent on the laws of supply and demand. If the demand is high, the price tends to
increase, if the supply is high, the price will tend to decrease.

2. When the country is in recession, the right policy is to increase spending, reduce
taxes, or both. Such expansionary actions will bring more money to businesses and
consumers, incentivizing businesses to expand and consumers to buy more goods and
services.