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(Solved) Why does a country GDP not grow at a constant rate in reality? I


Why does a country GDP not grow at a constant rate in reality?

I need help in Q3 and Q4 in the attached assignment. 


 


 


 


 


 


Demand


A


 


 


Real Interest


Rate


 


Quantity of Loanable Fund


 


                                                                                                   

 




(4 marks) You now realise that the increased government revenues (that you analysed in Part a) coming from tax increases affecting the (after-tax) profitability of new investment. Following from your analysis in Part a), use the loanable funds model to demonstrate this policy effect and make a comparison to an analysis in Part a). You must also demonstrate your answers in Figure and explain.

Answer here (Tips: to create new lines, simply copy the existing curves and move to the new locations)

 

Supply


IA


=


SA


 


 


 


 


 


 


 


 


 


 


 


Demand


A


 


 


Real Interest


Rate


 


Quantity of Loanable Fund


 


                                                                                                    


(4 marks) The level of the government debt is one of the key concerns for the government. Find the data for the government debt to GDP for recent years for Singapore (you must attach a graph or table which shows this data). Make your own observations on the data that you find. Summarise the key arguments on the debate surrounding the government debts. Your summary must address the following; what the major concern for running the government deficits, what the economic reasoning to have the balanced budget? Your summary should be at least more than a half page in length.

(Please provide answer below)

 


MACRO1 (ECON1016) Assignment 1
(Chapter 28, 26&27)
Submit online by: 9PM (Melbourne time) 6th March (Sunday)
(see ?Assessment Task? in Blackboard)
Class Time and Day: ____________________________________________________________________________________________________
Student Name : _________________________________________________________________________________________________________
Student ID: ______________________________________________________________________________________________________________
This assignment covers the following topics:
Unemployment (Chapter 28)
Productivity and Growth (Chapter 26)
Saving, Investment and Financial System (Chapter 27)

READ THE FOLLOWING FIRST (Very Important)




This assignment contributes to 20% of the overall marks for the course.
Use this Word template only for your submission (ie, write down your answers in the space
provided in each question and submit) ? any other form of the file is NOT accepted for esubmission.



The recommended browser for submission is Chorme, Firefox or Explorer (some have suggested that
Safari might not work well).






The font size has to be at least 12.
Explain your answers, but be succinct.
Label and explain any diagrams, if any, that you use carefully (labelling each axis).
Show all of your working in order to get partial credits



Please ensure to attach the final version of the assignment.



After the due, any late submission will be marked as ?late? (a penalty of 10% (ie, 2 marks) per day
will apply).



Make sure you have included student ID and name in the front page of the assignment



Working with other fellow students is strongly encouraged. However, you cannot just copy your
friend?s answers. If we find out this, you will be harshly punished for the academic plagiarism. See
RMIT?s policy on this: http://www1.rmit.edu.au/browse;ID=sg4yfqzod48g1

Page 1 of 8

Macro1 (ECON1016), 1sem 2016

Short Answer Questions:
1) (4 marks in total) Compute variable indicators of unemployment using the following information. Please
show all of your working. If you do not, you will receive zero marks for the question(s).
Demographic Group

Number of Residents

Full-time workers

7000

Part-time workers

2000

Unemployed and looking for work

600

Unemployed and not looking for work due to
discouragement over job prospects

500

Not working due to disability

300

Not working due to retirement

900

Under the age of 16

3000

Total Population

14300

a) (1 mark) What is the size of the labour force in this economy?

Labour force = sum of the employed + sum of the unemployed
= 7000 + 2000 + 600
= 9600

b) (1 mark) Calculate the Labour Force Participation Rate for this economy. Report as a percentage to
two decimal places.

Labour Force Participation Rate = (labour force / adult population) x 100%
= 9600/ 14300 ? 3000
= 9600 / 11300
= 84.96%

c) (1 mark) Calculate the Unemployment Rate for this economy. Report as a percentage to two decimal
places.

Unemployment rate = (unemployed / labour force) x 100%
= 600 / 9600
= 6.25%

Page 2 of 8

Macro1 (ECON1016), 1sem 2016

d) (1 mark) Suppose that the natural rate of unemployment is considered to be 5%. What is the rate of
cyclical unemployment? Report as a percentage to two decimal places.
Unemployment rate = natural rate + cyclical unemployment
6.25% = 5% + cyclical unemployment
Cyclical unemployment = 6.25% - 5%
= 1.25%

Page 3 of 8

Macro1 (ECON1016), 1sem 2016

2) (4 marks in total)
Below you can find out the per capita real GDP of the 13 countries who have joined the European Union
(EU), and the EU average in 1999 (both in Column A). It also gives the GDP per capital growth rates in 2000
(Column B). Let us assume that countries will keep growing at the given rates until these countries reach the
level of the EU average. Answer the following questions and explain your answers and show all of your
working (in order to obtain partial marks).
Country

Real GDP
per capita in 1999
(before joining EU)

$25,660

Growth rate
of GDP per
capita in 2000
(%)
(B)
2.7

$5218
$5170
$4257
$9994
$4,259
$13,389
$13,025
$2,323
$1,691
$3,420
$3,092
$3,818
$6,230

(A)
EU average
Hungary (joined 2004)
The Czech Rep. (joined 2004)
Poland (joined 2004)
Slovenia (joined 2004)
Estonia (joined 2004)
Cyprus (joined 2004)
Malta (joined 2004)
Romania (joined 2007)
Bulgaria (joined 2007)
Lithuania (joined 2004)
Latvia (joined 2004)
Slovakia (joined 2004)
Turkey (pending)

Ratio of per
capital GDP to
EU average in 1999

Years to
double this
ratio

(C)

(D)
1

-

4.8

(Q2 b)

(Q2 b)

1.5
5.7
3.6
5.5
2.3
4.1
7.3
4.0
4.3
3.6
5.0
2.9

0.2015
0.1659
0.3895
0.166
0.5218
0.5076
0.0905
0.0659
0.1333
0.1205
0.1488
0.2428

77.8
25.0
50.0
15.2
53.9
43.8
77.8
30.4
350

a) (1 mark) Just observing the above table (doing no calculations), are there any countries that will not be
able to catch up to the level of per capita income in the EU based upon the assumption we have made?

Yes, The Czech Rep and Cyprus because its growth rate of GDP per capita in 2000 falls below
the EU average.
b) (2 marks) Fill in the information for Column C and D in the above table for Hungary (where it is marked
as Q2b). And then, using the Rule of 70 from the textbook, how many years will the ratio of Hungary's
GDP to EU average GDP take to double (hint: the growth rate of a fraction is approximately equal to the
growth rate of the numerator minus the growth rate of the denominator)? How many years do you think it
will eventually take real GDP per capita of Hungary to reach that of EU average?

( c ) Ratio of per capita GDP to EU average in 1999:
5218/25660
= 0.2033

Page 4 of 8

Macro1 (ECON1016), 1sem 2016

( d ) Growth rate = 4.8 ? 2.7
= 2.1
Rule 70 = 70 / Growth rate
= 70 / 2.1
= 33.3 years

c) (1 mark) The above calculation in part b) is based on the assumption that a country?s real GDP grows at a
constant rate. But in reality it does not. Why is that?

Page 5 of 8

Macro1 (ECON1016), 1sem 2016

3) In this question you analyse the effects of the following economic policies in the loanable fund

market diagram where we have real interest rate on a vertical axis and the quantity of loanable funds
on a horizontal axis.
a) (4 marks) Start in the initial equilibrium point A in below Figure where the quantity demanded
of loanable funds (IA) equals the quantity supplied of loanable funds (SA). Demonstrate and
explain the effect of an increases of the government revenue in the loanable fund market. Your
explanation must also include what happens to the real interest rate, the level of national savings,
and the level of investment as well.
Answer here (Tips: to create new lines, simply copy the existing curves and move to the new locations)
Real Interest
Rate

Supply

A

Demand
Quantity of
Loanable Fund

SA = IA

Page 6 of 8

Macro1 (ECON1016), 1sem 2016

b) (4 marks) You now realise that the increased government revenues (that you analysed in Part a)
coming from tax increases affecting the (after-tax) profitability of new investment. Following
from your analysis in Part a), use the loanable funds model to demonstrate this policy effect and
make a comparison to an analysis in Part a). You must also demonstrate your answers in Figure
and explain.
Answer here (Tips: to create new lines, simply copy the existing curves and move to the new locations)
Real Interest
Rate

Supply

A

Demand
Quantity of
Loanable Fund

SA = IA

Page 7 of 8

Macro1 (ECON1016), 1sem 2016

4) (4 marks) The level of the government debt is one of the key concerns for the government. Find the

data for the government debt to GDP for recent years for Singapore (you must attach a graph or table
which shows this data). Make your own observations on the data that you find. Summarise the key
arguments on the debate surrounding the government debts. Your summary must address the
following; what the major concern for running the government deficits, what the economic reasoning
to have the balanced budget? Your summary should be at least more than a half page in length.
(Please provide answer below)

Page 8 of 8


 


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