FNU FlJl NATIONAL UNIVERSITY College of Business, Hospitality and Tor m Studies School of Economies, Banking and Finance ECN 501 ~ Macroeconomics I Finat Examination: Trimester TI, 2016 ANSWER BOOKLET FINAL EXAM This examination constitutes 60% of total assessment of this unit and students must score 40/100 in this examination in order ¢o pass this unit. 'S with additional 10 MINUTES reading time, All answers are to be written in the Answer Bookdet provided, Write your ID Number on ALL pages and any extra sheets that you use. 4, This is a closed book examination, You are not permitted to access any books, notes ot other forms of written or electronic materials, Only non-progeammable calculators are allowed 5. Attach the extra sheets securely at appropriate place before handing-in the Answer Booklet to the supervisor. Sections Question “Marks Section A:Multiple Choice 20 Questions. All compulsory 20 Section 5 Questions. All compulsory 30 Section Graphical Analysis 4 Questions. All compulsory 40 Section D:Bssay 2 Questions. Only one compulsory 10 TOTAL/WEIGHT 100/60% ECN 501 ‘Trimester 2, 2016 1 TumoverSECTION A MULTIPLE CHOICE 20 MARKS There are 20 questions in this section and all are compulsory. Circle the letter that represents the BEST answer of your choice in the grid provided. Each question is worth Amark, 1 A B c D 2 A B Cc D 3 A B c D 4 A B c D 5 A B Cc D 6 A B c D 7 A B c D 8 A B c D 9 A B c D 10 A B Cc D 11 A B Cc D 12 A B Cc D 3 A B c D 14 A zB [a D 15 A B Cc D 16 A B Cc D 7 A B c D 18 A B c D 19 A B Cc D 20 A B ¢€ D ECN 501 ‘Trimester 2, 2016 2 TumoverSECTION B HORT ANSWERS 30 MARKS There are five (5) questions in this section and all are compulsory. Provide your explanations in 3 to 4 sentences and provide relevant examples in places where possible. Question 1 “Beonomic growth exhibits enhanced capacity of an Economy to increase its productive capacity from one period of time to another”. a. State three costs and three benefits of Economic Growth. [6 marks] Question 2 “Unemployment is said to seriously impede the National Economy”: a, Explain the difference between unemployed workers and unemployment rate, [4 marks} ECN 501 Trimester 2, 2016 3 Turnoverb, State how the Labor Force Pa ation Rate is calculated? [2 marks} Question 3 “ Discouraged workers are those persons who want to work but are unable to find work and have given up looking for work for certain reasons”. a. State and explain three reasons as to why some people are classified as discouraged workers. [3 marks} b. State three labour market in (3 marks] ECN 501 Trimester 2, 2016 4 TurnoverQuestion 4 “The value of a nation's currency fluctuates over time” a, Define Foreign Exchange Market. (2 marks} b, Distinguish between Currency Appreciation and Currency Depreciation. [4 marks] Question § “A Country's Balance of Payments Account consists of Current Account, few other sub accounts” “apital Account and a, What could be a reason as to why the current account balance doesn’t equal the capital aceount balance? [2 marks} ECN 501 ‘Trimester 2, 2016 5 Tumoverb, Explain what would be the correction procedure that equates the current account balance to the eapital account balance. (2 marks} ¢. How could a person be sure that the Balance of Payments account figure is correct? [2 marks] ECN S01 ‘Trimester 2, 2016 6 =~ TurnoverSECTION C CALCULATION AND GRAPHICAL ANALYSIS 40 MARKS Question 1 There are four (4) questions in this section and all are compulsory. ‘The following table shows data for a small economy of selected years. Caleulate and fill in the blanks on the table below. [10 marks} ‘Year Nominal GDP, | Real GDP, Price inflation Rate Billions Billions index(GDP (%) Deflator) 7900 $527.40 $2,376.70 : 1910 $911.50 26.29 1920 $4,761.30 8.42 1930 $4,742.50 80.22 1940 RSIS 28.67 1950 $12,590.00 109.67 1960 $14,500.00 “093 1970 $17,855.00 105.96 1980 $18,555.00 a7 1990 $20,543.00 103.42 Question 2 a. Explain fully the effect of an increase in government expenditure on AD, price level and Real GDP. Use AD-AS model (graph) to show this. [5 marks} ECN 501 ‘Trimester 2, 2016 7 Tumoverb, Assume that the level of technology in Fiji improves vastly. Using AD-AS model (graph), explain fully the effect of this on price level and Real GDP. [5 marks] CN 501 ‘Trimester 2, 2016 8 TurnoverQuestion 3 “Physical capital, human capital and technology are all suid to increase labor productivity of any nation”. In classical context, explain the effect of a rise in labor productivity on full employment, wage rate and potential GDP. Show the above effect on a labor market graph and production function graph. Label all axes correctly, [10 marks} ues ‘The following information is for LA land Economy. All figures are in millions of dollars exeept for the parameters, C=200+0.8YD Equilibrium Condition Y=C #1 4G+NX ECN 501 Trimester 2, 2016 9 Turnovera, Using the above information, ealeulate the value of equilibrium income for this economy. [5 marks] b. Now assume that government expenditure increases by 50 million dollars, calculate by how much equilibrium income will change. [5 marks] ECN 501 Trimester 2, 2016 10 TumoverSECTION D ESSAY 10 MARKS ‘There are fo (2) questions approximately 250-300 words (o answer the questions. Graphical this section. Answer only one. Write an essay of Hustrations are required to substantiate your answers, Question 1 Aggregate demand curve shows the relationship between the quantity of real GDP demanded and the price level. The AD curve slopes downward. a. Discuss two reasons why AD curve slopes downwards. [4 marks] b. Discuss three factors that cause changes in Aggregate demand/shift in Aggregate demand curve [6 marks} OR Question 2 “Compared to other Pacific Island Countries (PICs), the financial sector in Fifi has well- developed institutions where broad array of services is offered by commercial banks”. With reference to above statement; a, Discuss how banks create money. [4 marks] b. Discuss three (3) common financial innovations offered by commercial banks in Fiji. {3 marks} ©. Discuss three (3) factors that affeet demand for money in Fiji, [3 marks] ECN 501 Trimester 2, 2016 11 TumoverTurnover 12 ‘Trimester 2, 2016 ECN S01ECN S01 THE END. ‘Trimester 2, 2016 13