Knowledge and Understanding

Identify whether each of the following transactions are to be included in GDP, and if yes which expenditure component is it a part of. [Ch: 8] [8 Points]
1. An accountant receives payment for doing clients income taxes

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A magazine company buys magazine print to add to its inventory of supplies

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You sell a used computer to a friend.

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Home owner repairs her own basement

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The table below shows the national income accounts for New Zealand [16 points]

New Zealand National Accounts ($ billions)

Corporate income 98

Exports 70

Wages & Salaries 546

Net international Income to rest of the world 8

Gross investment 155

Government purchases 186

Indirect taxes 80

Personal consumption 500

Imports 30

Depreciation 77

Proprietors incomes and rents 56

Statistical discrepancy ?

What is the income-based estimate of New Zealand’s GDP? [5]
What is the expenditure Estimate? [5]
What is the value of the statistical discrepancy that is added to the lower estimate and subtracted from the higher estimate to find a single GDP value? [1]
What is New Zealand’s GNI? [2] Is it higher or lower than its GDP? [1]

What does this suggest about income earned by residents of other countries for their involvement in production in New Zealand relative to income earned by residents of New Zealand for their involvement in production in the rest of the world? [2]

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Finding Participation & unemployment Rates [11]

2019 2020

Total population 15 years and over 4.2 million 4.2 million

Those 15 years and over not in the labour 1.4 million 1.4 million

force population

Part-time workers who wish to have full-time jobs 100,000 125 000

Part-time workers who do not wish to have full-time jobs 300,000 375,000

Discouraged workers 400,000 500,000

Workers with full-time jobs 1.2 million 1.3 million

Unemployed members of the labour force 150,000 160,000

Calculate: the labour force population; labour force, participation rate, and official unemployment rate for 2019. Then calculate same variables for 2020. [6]

Calculate for both 2019 and 2020 what the unemployment rate would be if it included underemployed and discourage workers [2]

What does this say about this economy? *Using course terminology/concepts [3]

Section1: ____/27

Thinking and Inquiry

Royal Bank has a reserve ratio of 4%, $6 million issued in deposits, and $300,000 in actual reserves. [8 points]
1. Identify this bank’s initial desired reserves and initial excess reserves.
2. What is the effect on the bank’s excess reserves if $20,000 in currency is deposited in the bank?
3. Calculate the money multiplier in this banking system.
4. What is the final amount by which the money supply can change once the process of money creation in the banking system is complete?

Answer and Work here:

Identify if the monetary policy a government should use in the following cases [7 points]
1. GDP has fallen 6 months in a row ___________________________
2. An economy is in the expansion phase ___________________________
3. Demand is lower than desired ___________________________
4. Full-employment ___________________________
5. Inflation rate is rising ___________________________
6. Bank of Canada has lowered its overnight rate ___________________________
7. Aims to reduce money supply ___________________________

In each of the following cases, a particular fiscal policy affects an economy’s AD (aggregate demand) curve via the spending multiplier. Calculate the spending multiplier and the find the size and direction of the shift in the AD curve.

[ch: 11]. [8 points]

Government purchases increase by $2 billion in an economy with an MPW of 0.65

Government purchases decrease by 4 Billion in an economy with an MPC of 0.45

A $3 Billion tax rise occurs in an economy with an MPW of 0.7

A $1 Billion tax cut causes an initial $1.5 Billion increase in spending on domestic items.

In each of the following cases, identify whether the economy faces a recessionary or inflationary gap and outline possible fiscal policies [6 Points]
1. The unemployment rate is 5.5%, and inflation is rising.

The unemployment rate is 6.5%, and prices are stable

Real output is falling, and the unemployment rate is 9.5%

Thinking: _____/29

Communication

Economy X has these given economic indicators [10 Points]

Year	GDP [trillion]	Unemployment Rate	CPI	GNP [trillion]
2018	3.55	6.5%	0.24	4.89
2019	3.44	6.9%	0.20	4.50
2020	3.43	7%	0.19	3.89

Based on these numbers, what is your analysis about economy X’s economic health and future economic health? What do you recommend to help this economy?

MAKE SURE TO BE VERY DETAILED USING COURSE TERMINOLOGY AND LIST ALL ASSUMPTIONS FOR FULL POINTS!!

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Based off the business cycle below, answer the following questions [15 points]

2012 2013 2014 2015 2016 2017 2018 2019 2020

List 3 assumptions about this country’s economic health that could be true according to the business cycle data for the period of 2014 to 2016 [3 pts]

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What year(s) did this economy have recessionary Gaps? [2]

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What year(s) did an expansionary policy begin to take effect? [2]

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Identify year(s) of economic hardship for this country’s citizens [2]

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What policy do you recommend for this country moving forward into 2021& why?[4]

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F) What year(s) can you assume recession psychology prevailed? [2]

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Communication: _____/25

Application

Use the data in the table below to calculate (a) M1+, (b) M2, (c) M3 [ch:12] [9 Points]

Total value of corporate shares……………………………………………………………….. $600 Billion

Currency outside chartered banks…………………………………………………………… $30 Billion

Chequable notice deposits at chartered banks………………………………………… $90 Billion

Publicly-held demand deposits at chartered banks…………………………………. $29 Billion

Federal government bonds…………………………………………………………………….. $644 Billion

Other-liquid assets included in M2+………………………………………………………… $22 Billion

Non-personal term and foreign currency deposits at chartered banks …… $276 Billion

Personal term deposits at chartered banks ……………………………………………. $125 Billion

Non-chequable notice deposits at chartered banks………………………………… $75 Billion

Chequable notice deposits at near banks ………………………………………………. $100 Billion

Non-chequable notice deposits at near banks ……………………………………….. $60 Billion

Answer and SHOW WORK here [1 each]:

M1+

The table below shows inflation and unemployment data for Milton. [ch:13] [6 points]

Year	Inflation Rate	Unemployment rate
2018	4	5
2019	2	8
2020	3	6

Would expansionary or contractionary stabilization policies have caused the change that takes place between 2018 and 2019? What type of stabilization policies would have caused the change between 2019 and 2020? [5 points]

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Suppose that in 2021, the inflation rate is 5%and the unemployment rate is 10%. What has happened to the Philips curve? What could explain this change? Give an example of a factor that might have caused it. [5 points]

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Section Total: _____/19 Total: ______/100

Economics home work assessment

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