Question Sample Related Economics

ECO 104: Introduction to Macroeconomics

Section 2 & 17

Summer 2010

University X

Assignment 3

Full marks: 10

Time of Submission: Just A week After Assigning, at the end of the class time.

Person to be submitted to :ME

Answer all the questions. The parenthesis carries the credit for each question.

1)      Suppose in a country A, total population is 100 million. Of them, 80 million is employed, 10 million is unemployed. The country also has 5 million in under-aged children (below 16 years), 3 million reitrees, and 2 million full time students and 4 million part time students. From these data, find out the employment rate, unemployment rate and labor force participation rate.                                        (3)

2)      a) The Central Bank of Bangladesh conducts a 10 crore taka open market purchase of Government bonds. If the required reserve ratio is 10%, what is the largest possible increase in the money supply that could result? What is the smallest? Explain your answer.                                                                                                                    (2)

b) Suppose Janata Bank experiences a 500 taka increase in demand deposit. With 10% required reserve, show the T-account of the bank. If the required reserve reduces to 5%, what would be the increase in money supply? If the bank still decides to keep excess reserve of an additional 5%, what would then be the increase in money supply?                                                                                                              (3)

3)      If money supply increases from 500 to 600 billion taka, what would the price be provided the initial price level is 110? How can we conclude so?              (2)

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