Question Sample related Introduction to Macroeconomics

ECO 104: Introduction to Macroeconomics

Section 2 & 17

Summer 2010

University X

Assignment 2

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)      Examine what goes under GDP consideration and what does not. Give your rational:                                                                                                       (4)

a)      Unsold perishable potatoes.

b)      Flowers grown in commercial nurseries.

c)      An apartment obtained in a lottery

d)      Gold jewelry stolen from “Amin Jeweller”.

2)      Examine how the following events will distort CPI construction or the conventional basket of goods considering Coca-cola is a part of it and each event is mutually exclusive to the other.                                                     (3)

a)      Coke comes up with new lemony flavor.

b)      Coke sells more in a bottle at the same price.

c)      Coke becomes more expensive.

3)      Suppose the Government is encouraging money laundering when upto 50 lacs taka can be invested with a minimal tax rate. At the same time, Tariff on importable is increased which constitutes a major part of raw materials needed for domestic industrial production. Now, if change in supply is greater than change in demand, what happens to real interest rate and quantity of loanable funds available in the market?                                                            (3)