Question 1: [Total 10 marks]Here are some data for an economy. Find its GDP and explain your calculation. $ (billion)Consumption expenditure 600Exports 75Government purchases of good and services 200Construction of new houses and apartments 100Sales of existing homes and apartments 200Imports 50Beginning-of-year inventory stocks 100End-of-year inventory stocks 125Business fixed investments 100Governments payments to retirees 100Households purchases of durable goods 150 Question 2 [Total 10 marks]The Australia government recently signed a contract to build a new Navy shipyard in Western Australia and plans to spend $90b. Assuming fixed prices and that all monies will be spent in Australia, explain how the Australian economy will be affected by the $90b in new government purchases using AD-AS framework. (Remember: If you do not talk about the AD and AS curves, you are not using the AD-AS model.)Question 3: [5 marks for each subsection; Total 10 marks]Government survey determines that typical family expenditures each month in the year designated as the base year which are as follows:Base Year family expediture on: $20 pizzas 10 eachRent of apartment 600 per monthPetrol and car maintenance 100Phone service 50In the year following the base year, the survey determines that pizzas have risen to $11 each, apartment rent is $640, petrol and maintenance has risen to $120, and phone service has dropped to in price to $40.a. Find the CPI in the subsequent year and the rate of inflation between the base and the subsequent year.b. The family’s nominal income rose by 5% between the base and the subsequent year. Are they worse off or better off in terms of what their income is able to buy?
Question 4 [a. 8 marks; b. 2 marks; Total 10 marks]a. List three types of unemployment and their causes. Which of these types is economically and socially the least costly? Explain.b. Why is traditional term ‘business cycles’ a misnomer? How does your answer relate to the easy or difficulty of forecasting peaks and troughs?
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