# ECON 201 SEU Inflation & Unemployment Macro Economics Worksheet

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Assignment 3 Questions: Week 10 to Week 13: – [5 Marks]Q1: You take \$1000 that you held as currency and put it into the banking system. The reserve ratio is equal to 10%. [1.5 Marks]1)Calculate the money multiplier.2)By how much will increase the total amount of deposits in the banking system?3)By how much will increase the money supply? Q2. (Labor Force, Labor Participation Rate and Unemployment Rate). [1.5 Marks]1)In Year 1, country A has a labor force of 100, of whom 90 are employed. The remaining 50 people in the country are not in the labor force.Calculate the employment ratio, the labor participation rate and unemployment rate.Over the course of the year, 10% of the employed become unemployed, while 20% of the unemployed become employed; 5% of the employed leave the labor force, while 4% of those not in the labor force become employed. The population remains unchanged.2) Fill in the following table. (Hint: It might be helpful to draw the flow diagram before answering.)In Year 1In Year 2Population150150Labor Force100EmployedUnemployed3) Calculate the employment ratio, the labor participation rate and unemployment rate. (Fractions suffice.) Q3. Assume that a bank has on its asset side reserves of 1000 and loans of 6000 and on its liability side deposits of 7000. Assume that the required reserve ratio is 10 percent. [2 Marks]1) How much is the bank required to hold as reserves given its deposits of 7000?2) How much are its excess reserves?3) By how much can the bank increase its loans?—The answers are attached I just need to make sure it’s correct and please re-write it for me. and I need references

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Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Assignment 3
ECON201 (1st Term 2021-2022)
Course Name: Macroeconomics
Students Name:
Course Code: ECON201
Students ID Number:
Semester: I
CRN:
Academic Year: 1442/1443 H, 1st Term
For Instructors Use only
Instructors Name: Hajar AlEisa
/5
Level of Marks: High/Middle/Low


This assignment is an individual assignment.
Due date for Assignment 3 is 2nd December 2021

The Assignment must be submitted only in WORD format 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.
???????? ??????? ?????????
?????? ????????
???????? ???????? ????????????
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Assignment Purposes/Learning Outcomes:
After completion of Assignment-3 students will able to understand the
LO 1.2: Describe how to evaluate macroeconomic conditions such as unemployment, inflation,
and growth.
LO 1.3: Recognize the fundamental determinant’s of a nation’s long-run economic growth.
Assignment 3 Questions: Week 10 to Week 13: – [5 Marks]
Q1: You take \$1000 that you held as currency and put it into the banking system. The
reserve ratio is equal to 10%.
[1.5 Marks]
1) Calculate the money multiplier.
2) By how much will increase the total amount of deposits in the banking system?
3) By how much will increase the money supply?
Q2. (Labor Force, Labor Participation Rate and Unemployment Rate).
[1.5 Marks]
1) In Year 1, country A has a labor force of 100, of whom 90 are employed. The
remaining 50 people in the country are not in the labor force.
Calculate the employment ratio, the labor participation rate and unemployment rate.
Over the course of the year, 10% of the employed become unemployed, while 20%
of the unemployed become employed; 5% of the employed leave the labor force,
while 4% of those not in the labor force become employed. The population remains
unchanged.
2) Fill in the following table. (Hint: It might be helpful to draw the flow diagram
Population
Labor Force
Employed
Unemployed
In Year 1
150
100
In Year 2
150
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
???????? ??????? ?????????
?????? ????????
???????? ???????? ????????????
College of Administrative and Financial Sciences
3)
Calculate the employment ratio, the labor participation rate and unemployment
rate. (Fractions suffice.)
Q3. Assume that a bank has on its asset side reserves of 1000 and loans of 6000 and on
its liability side deposits of 7000. Assume that the required reserve ratio is 10
percent.
[2 Marks]
1) How much is the bank required to hold as reserves given its deposits of 7000?
2) How much are its excess reserves?
3) By how much can the bank increase its loans?
??????????????? ?????????
?????? ????????
???????? ???????? ????????????
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Assignment 3
ECON201 (1st Term 2021-2022)
Course Name: Macroeconomics
Students Name:
Course Code: ECON201
Students ID Number:
Semester: I
CRN:
Academic Year: 1442/1443 H, 1st Term
For Instructors Use only
Instructors Name:
Level of Marks: High/Middle/Low


This assignment is an individualassignment.
Due date for Assignment 3 is 2nd December 2021

The Assignment must be submitted only in WORD format 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.
Page | 1
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
??????????????? ?????????
?????? ????????
???????? ???????? ????????????
College of Administrative and Financial Sciences
Assignment Purposes/Learning Outcomes:
After completion of Assignment-3 students will able to understand the
LO 1.2:Describe how to evaluate macroeconomic conditions such as unemployment, inflation,
and growth.
LO 1.3:Recognize the fundamental determinant’s of a nation’s long-run economic growth.
Assignment 3 Questions: Week 10 to Week 13: – [5 Marks]
Q1: You take \$1000 that you held as currency and put it into the banking system. The
reserve ratio is equal to 10%.
[1.5 Marks]
1) Calculate the money multiplier.
The money multiplier equals 1/R= 1/10%= 10
2) By how much will increase the total amount of deposits in the banking system?
The maximum possible increase in deposits is = Deposits * Multiplier= 1000*10
= 10000
3) By how much will increase the money supply?
The money supply increase= the maximum possible increase in deposits  the
amount of the deposit= 10000- 1000= 9000
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Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Q2. (Labor Force, Labor Participation Rate and Unemployment Rate).
[1.5 Marks]
1) In Year 1, country A has a labor force of 100, of whom 90 are employed. The
remaining 50 people in the country are not in the labor force.
Calculate the employment ratio, the labor participation rate and unemployment rate.
?
Employment Percentage = 100 * Number of Employment / Manpower = 100*90
/ 100 = 90%
?
So labor participation rate = Labor force / population * 100
= 100/150 * 100 = 66,67
?
Unemployment rate = 100 * number of people who are not in work / labor force
= 100 * 10/100 = 10%
Over the course of the year, 10% of the employed become unemployed, while 20%
of the unemployed become employed; 5% of the employed leave the labor force,
while 4% of those not in the labor force become employed. The population remains
unchanged.
Page | 3
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Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
2) Fill in the following table. (Hint: It might be helpful to draw the flow diagram
In Year 1
In Year 2
Population
150
150
Labor Force
100
85
Employed
90
77
Unemployed
10
8
350
300
year 1
250
200
150
year 2
100
50
0
Population
3)
Labour Force
Employed
Unemloyed
Calculate the employment ratio, the labor participation rate and unemployment
rate. (Fractions suffice.)
?
Employment Percentage = 100 * Number of Employment / Manpower = 100 *
77/85 = 90,59%
Page | 4
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
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College of Administrative and Financial Sciences
?
The rate of participation in work = labor force / population * 100 = 85/150 = *
100 = 56,67%
?
Unemployment rate = 100 * number of people who do not work / labor force =
100 * 8/77 = 10,39%
Q3. Assume that a bank has on its asset side reserves of 1000 and loans of 6000 and on
its liability side deposits of 7000. Assume that the required reserve ratio is 10
percent.
[2 Marks]
1) How much is the bank required to hold as reserves given its deposits of 7000?
Required Reserves = Required Reserve Ratio × Deposits Required Reserves = 0.10 ×
7000 Required Reserves = 700
2) How much are its excess reserves?
Excess Reserves = Actual Reserves  Required Reserves Excess Reserves = 1000  700
Excess Reserves = 300
3) By how much can the bank increase its loans?
Because the bank’s excess reserves are positive, it has additional lending capacity and
can lend to businesses and consumers. The bank can either boost deposits or decrease
Page | 5
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Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
reserves in this situation. Assume the bank decides to raise new deposits in order to
provide new loans. The bank has 1000 reserves, allowing it to raise deposits up to
1000/0.1 = 10,000. If the bank raises \$10,000 in deposits, it will be able to make total
loans for the difference between deposits and reserves, which is \$10,000 \$1,000 =
\$9,000.
In this situation, the bank is giving an additional loan of \$3,000 to the customer. The
bank’s balance sheet then becomes:
Assets
Liabilities
Reserves1000
Deposits 10000
Loans 9000
It’s worth noting that the bank can only grow its loans by 3000 if they’re all deposited in
the same bank. In this situation, the bank completely absorbs the multiplier’s influence.
Alternatively, the bank can choose to deplete reserves and use the remaining reserves to
make loans. Reserves can be depleted to the exact amount of extra reserves, which is
300. The balance sheet in this situation would look like this:
Assets
Liabilities
Reserves700
Deposits 7000
Loans 6300
In this case, the bank makes additional 300-dollar loans. Even so, the money supply will
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Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
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College of Administrative and Financial Sciences
expand by 300/0.1 = 3000 at the economy-wide level because excess reserves injected
by the bank into the system 2 will be magnified by the multiplier effect. The only
difference between this situation and the one described above is that borrowers in this
case prefer to deposit their loans in other banks.
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