Data analysis-GDP

Page 1 of 2 - MACROECONOMICS 1 – (ECON1102) – WEEK 10 ASSIGNMENT

ECON1102 – S2 2018 – WEEK 10 TAKE-HOME ASSIGNMENT (15 MARKS TOTAL)

General Guidance: Answer the question as it is written and make sure you identify any particular assumptions you might be using to answer the question and be very clear about your arguments. Please follow the guidance provided for each question below on answer length. Excessively long answers will be penalized.

For diagrams, you may insert, as an image file, a hand-drawing into the file. Format should be A4, font size 12, single space.

File format: pdf and MS word only (note that assignments in other formats will be marked as zero).

Please include your Uni-ID in the Turnitin filename; e.g. [U1234567] Assignment2.

1. DATA ANALYSIS QUESTION (Maximum one page)

Refer to Figure 1 in your answers

(a) What do the data say about changes in real GDP and price inflation in the US from 1929 to 1942. How do these data indicate the occurrence of the Great Depression? (2 MARKS)

(b) How would you explain the patterns in the data in term of SRAS, AD and LRAS relationships and shifts? Note: make sure your explanation is consistent with the data. (4 MARKS)

Figure 1: US Real GDP and price deflator changes 1929-1942

Page 2 of 2 - MACROECONOMICS 1 – (ECON1102) – WEEK 10 ASSIGNMENT

2. CONCEPTUAL CLARITY QUESTION (Maximum half-page) (2 MARKS)

TRUE or FALSE and EXPLAIN: “The MPS in Japan is higher than the MPS in Australia. Therefore the consumption function in Japan will have a flatter slope than the consumption function in Australia.”

3. CALCULATION QUESTION (Maximum half-page)

Given the information below (Figure 2),

(a) Calculate a, b., c., and d. as indicated in the table. (2 MARKS)

(b) Calculate the multiplier(s). What do these data indicate about the specific relationship applying here between disposable income levels and MPC? (2 MARKS)

Figure 2

4. TECHNICAL MODEL USAGE (Maximum one page) (3 MARKS)

The Australian government imposes a new mandate on all companies requiring them re-fit their operations with a government approved device that monitors each company’s electricity use and automatically reports if it exceeds the new monthly kilowatt usage set by the government regulator. Firms must pay for the new mandatory device and all other associated compliance costs. Use a dynamic AD-AS model that incorporates LRAS and SRAS to show just the initial ceteris paribus effects of this mandate on the macroeconomy. Explain the intuition behind your answer.