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# Question 1: [Total 10 marks] Here are some data for an economy. Find its GDP and explain your calculation. \$ (billion) Consumption expenditure 600 Exports 75 Government purchases of good and services...

Question 1: [Total 10 marks]
Here are some data for an economy. Find its GDP and explain your calculation. \$ (billion)
Consumption expenditure 600
Exports 75
Government purchases of good and services 200
Construction of new houses and apartments 100
Sales of existing homes and apartments 200
Imports 50
Beginning-of-year inventory stocks 100
End-of-year inventory stocks 125
Governments payments to retirees 100
Households 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 each
Rent of apartment 600 per month
Petrol and car maintenance 100
Phone service 50
In 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?

Sep 25, 2019
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