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ACADEMIC INTEGRITY
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 or designate.
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QUESTION 1 – [CLO 2] - 20 MARKS- COMPULSORY
ii) What will be the value of the equilibrium GDP in economy T? (6 marks)
ii) The equilibrium GDP in economy T can be found by setting total output (Y) equal to total
spending (C+I+G+X-M). Substituting the given values, we get Y = 1500+0.6Y + 1200 + 2500 +
500 - 400 - 1000. Solving for Y, we find Y = 5400.
iii) The value of the multiplier for economy T can be calculated using the formula: Multiplier = 1
/ (1 - MPC). Substituting the MPC value of 0.6, we get Multiplier = 1 / (1 - 0.6) = 2.5.
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iv) Economy T is experiencing a trade surplus because the value of exports (X = 500) exceeds
the value of imports (M = 400), resulting in a positive net export balance.
v) In the context of the circular flow of income, leakages refer to the withdrawal of income from
the flow, including saving (S), taxes (T), and imports (M). Injections, on the other hand, refer to
the introduction of income into the flow, including investment (I), government spending (G), and
exports (X). For example, when individuals save money (leakage), it reduces the amount of
money available for spending and investment. Conversely, when the government spends money
on infrastructure projects (injection), it adds to the total income in the economy.
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QUESTION 2 – [CLO 5] (20 MARKS)
The Economic Commission for Latin America and the Caribbean (ECLAC) says the region’s
foreign trade in 2020 had its worst performance since the global financial crisis of 2008-2009,
because of the economic crisis prompted by the global COVID-19 pandemic and the restrictions
imposed by governments to stop its spread. (Daily Gleaner, dated September 27, 2021)
b. Outline two (2) trade restrictions the government could have implemented
to stop the spread of the virus.
(4 marks)
c. How can the restrictions stated in (b) above contribute to the “foreign trade
in 2020 having its worst performance.” (2 marks)
44d. Explain two (2) arguments in favor of free trade and two (2) arguments
against free trade. (8 marks)
1. Economic growth: International trade allows countries to specialize in the production of goods
and services in which they have a comparative advantage. This specialization leads to increased
efficiency and economic growth.
2. Increased consumer choices: International trade provides consumers with access to a wider
variety of goods and services at competitive prices, leading to better quality and lower costs for
consumers.
3. Foreign investment and job creation: International trade can attract foreign investment and
create job opportunities as businesses expand their operations to meet international demand for
their products and services.
b. Two trade restrictions the government could have implemented to stop the spread of the virus
include:
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1. Import/export bans: Governments could have imposed restrictions on the import and export of
certain goods and services to limit the movement of people and goods across borders, thereby
reducing the spread of the virus.
2. Quarantine measures for imported goods: Governments could have implemented quarantine
measures for imported goods and products to ensure that they are not carrying the virus, thereby
reducing the risk of transmission through international trade.
c. The restrictions stated in (b) above could contribute to the "foreign trade in 2020 having its
worst performance" by disrupting supply chains, reducing the volume of goods and services
traded, and increasing costs associated with international trade. Import/export bans and
quarantine measures could lead to delays, shortages, and increased expenses, ultimately
impacting the overall performance of foreign trade.
1. Economic efficiency: Free trade allows countries to specialize in the production of goods and
services in which they have a comparative advantage, leading to increased efficiency and
economic growth.
2. Consumer benefits: Free trade provides consumers with access to a wider variety of goods and
services at competitive prices, leading to better quality and lower costs for consumers.
1. Job displacement: Free trade can lead to the displacement of domestic workers as industries
face competition from foreign producers with lower labor costs.
2. Loss of national sovereignty: Critics argue that free trade agreements can undermine a
country's ability to enact policies that protect domestic industries and workers, leading to
potential loss of control over economic decision-making.
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QUESTION 3 – [CLOs 4, 3] - 30 MARKS
(a) List and explain the four (4) main functions of money? (4 marks)
(b) If you were the Governor of the Bank of Jamaica (BOJ), state three (3)
monetary measures that could use to control money supply. (6 marks)
Three monetary measures that can be used to control the supply of money are:
1. in the economy.
(c) Explain the economic concept ‘run on a bank’ and provide one (1) possible
reason for such an event: (2 marks)
(d) Briefly outline four (4) of the seven (7) characteristics of money. (4 marks)
(e) In April 2020, the BOJ plans to set the Required Reserve Ratio (RRR) at 20%.
By how much will the money supply to increase, if a $10,000 deposit is made
immediately afterwards? (4 marks)
(b) As the Governor of the Bank of Jamaica, three monetary measures that could be used
to control money supply are:
1. Open market operations: The central bank can buy or sell government securities to
influence the amount of money in the banking system.
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2. Reserve requirements: Adjusting the percentage of deposits that banks are required to
hold as reserves can impact the amount of money available for lending.
3. Discount rate: Changing the interest rate at which commercial banks can borrow from
the central bank can affect their willingness to lend and the overall money supply.
(c) A 'run on a bank' occurs when a large number of customers withdraw their deposits
from a bank due to concerns about its solvency, leading to a potential bank failure. One
possible reason for such an event could be widespread rumors or news about the financial
instability of the bank, causing a loss of confidence among depositors.
(e) If the BOJ sets the Required Reserve Ratio (RRR) at 20% and a $10,000 deposit is
made immediately afterwards, the money supply will increase by $50,000. This is
calculated by taking the initial deposit amount and dividing it by the RRR (10,000 / 0.20
= 50,000).
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[CLO 4]
f. Outline the measures used by monetary and fiscal authorities to influence economic
growth. (4 marks)
g. If the central bank decides to make more money available to the public, what policy
tools does it have at its disposal?
(4 marks)
f. Monetary and fiscal authorities use various measures to influence economic growth. Monetary
authorities can influence growth through policies such as adjusting interest rates, open market
operations, and reserve requirements. Fiscal authorities, on the other hand, can influence growth
through government spending, taxation, and public investment.
g. If the central bank decides to make more money available to the public, it can use policy tools
such as open market operations, lowering reserve requirements, and lowering the discount rate.
These tools can increase the money supply and make more funds available to the public for
borrowing and spending, thereby influencing economic activity.
h. Inflation targeting is a monetary policy strategy where the central bank sets a specific inflation
target and adjusts its monetary policy to achieve that target. This involves using tools such as
interest rate adjustments, open market operations, and reserve requirements to control the money
supply and influence inflation rates. The goal is to maintain a stable and predictable inflation rate
within the specified target range.
[CLO 3]
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END OF ASSESSMENT
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