ECON 201 Saudi Electronic University Macro Economics Worksheet

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Instructions – PLEASE READ THEM CAREFULLY
• The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism).
• Submissions without this cover page will NOT be accepted.
Problem 1 (15 marks)
Below, you are provided with the demand and supply curves for t-shirts and the world price
of a t-shirt. You will use this information to identify whether the country imports or exports tshirts. You will also examine the impact of a tariff on the amount of consumer and producer
surplus that results in this market.
1. Suppose that the world price of a t-shirt is $20. Does this country import or export tshirts? How many?
2. Suppose that this country engages in trade.
a) Calculate the amount of consumer surplus that results in this market.
b) Calculate the amount of producer surplus that results in this market.
3. Suppose that the government imposes a $10 import tariff on t-shirts.
a) How many t-shirts do domestic consumers purchase after this import tariff is
imposed?
b) How many t-shirts do domestic suppliers sell after this import tariff is imposed?
c) How many t-shirts does this county import?
d) Calculate the amount of consumer surplus that results in this market.
e) Calculate the amount of producer surplus that results in this market.
f) Calculate the amount of government tax revenue generated by the import tariff.
g) Calculate the amount of deadweight loss that results from the imposition of the
tariff.
Problem 2 (5 marks)
Below, you are provided with three years of data on the quantities that are produced
of two goods and the market price of each. You will use this data to calculate Nominal
GDP and Real GDP.
Bananas and Mango are produced in Philippines. Many other final goods and services are
produced in Philippines, but we will assume that Bananas and Mango are the only two final
goods produced in this country. The table below provides the number of bananas and mango
that are produced in Philippines in three different years. The table also provides the price of
a banana and the price of a mango in each year.
Year
2015
2016
2017
Quantity of
Price of
Quantity of
Price of
Bananas
Bananas
Mango
Mango
1,200
1,260
1,290
$0.75
$0.80
$1.00
600
620
650
$10.00
$10.50
$11.00
1) What is the value of Nominal GDP in Philippines in 2015, 2016 and 2017?
2) Treating 2015 as the base year, calculate the value of Real GDP in Philippines in
2015, 2016 and 2017?
Problem 3 (10 marks)
Below, you are provided with two years of data on the quantities of two goods that the
average, urban family of four consumes and the market price of each. You will use these data
to calculate the Consumer Price Index (CPI) and inflation rate.
Cheese and Chocolate are two goods that are consumed in Holland. Many other final goods
and services are consumed in Holland, but for simplicity, we will assume that Cheese and
Chocolate are the only two final goods consumed in the country. The table below provides the
quantity of Cheese and Chocolate that are consumed by the average, urban family of four in
Holland in two different years. The table also provides the price of a Cheese and the price of
chocolate in each year.
Year
2016
2017
Quantity of
Chocolate
Price of
chocolate
Quantity
of Cheese
150
165
€10.50
€13.00
45
52
Price of
cheese
€15.00
€17.00
Suppose that 2016 is the base year.
1) Calculate the CPI in 2016 and 2017. Round your answer to the nearest onehundredth.
2) Calculate the 2017 inflation rate. Round your answer to the nearest one-tenth of one
percent.
Answer:

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