FEEDBACK TUTORIAL LETTER ASSIGNMENT 2 SECOND SEMESTER 2018 PRINCIPLES OF MACROECONOMICS PMA512S

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1 FEEDBACK TUTORIAL LETTER ASSIGNMENT 2 SECOND SEMESTER 2018 PRINCIPLES OF MACROECONOMICS PMA512S 1

2 Course Name: Course Code: PRINCIPLES OF MACROECONOMICS PMA512S Department: ACCOUNTING, ECONOMICS AND FINANCE Course Duration: ONE SEMESTER NQF Level and Credit: LEVEL 5, 12 CREDITS The marker-tutor should populate this information. Moderator and Content-Editor should insert their details. Your marker-tutor for PRINCIPLES OF MICROECONOMICS The Namibia University of Science and Technology has appointed Ms K. Kavezeri, Ms E. Mwatondange, and Mr M. Mbaha as marker-tutors for Principles of macroeconomics and they will be at your service, should you experience any problems with your studies or with the assignments. Contact details are as follows: Ms K. Kavezeri Tel.: Marker-Tutor to insert this information Marker-Tutor to insert this information Ms E. Mwatondange Cell: Mr M. Mbaha Cell:

3 Your moderator for ADD COURSE NAME HERE The Namibia University of Science and Technology has appointed MODERATOR NAME HERE as the moderator for ADD COURSE NAME HERE Tel.: telephone number here address here Moderator to insert this information Your content-editor for ADD COURSE NAME HERE The Namibia University of Science and Technology has appointed CONTENT-EDITOR NAME HERE as the moderator for ADD COURSE NAME HERE Tel.: telephone number here address here Content-Editor to insert this information ASSIGNMENT 1 QUESTION 1 [10 Marks] 1. C 2. D 3. C 4. B 5. A 6. C 7. B 8. D 9. D 10. B QUESTION 2 [15 Marks] 1. You are provided with the following information: Table 1 Item Amount Gross Domestic Expenditure (GDE)

4 Exports of goods and services 400 Imports of goods and services 500 Consumption expenditure of households Change in inventories -100 Government expenditure 500 Consumption of fixed capital 200 a) Calculate the Gross Domestic Product. (3) GDP = GDE + X M = = 1900 b) Calculate the gross fixed investment expenditure. (3) GROSS FIXED INVESTMENT EXPENDITURE = GDE C G CHANGE IN INVENTORIES ( 100) = 400 c) Calculate the net fixed investment expenditure. (2) NET GROSS FIXED INVESTMENT EXPENDITURE = GROSS FIXED INVESTMENT EXPENDITURE DEPRECIATION = = 200 d) Which approach to calculating GDP is being used here? (1) EXPENDITURE APPROACH 2. Consider the information provided below and answer the questions that follow. GDP 1000 Value added by the primary sector 500 Value added by the secondary sector 150 a) Calculate the value added by the tertiary sector. (2) = 350 b) Calculate the relative contributions by the primary, secondary and tertiary sectors to GDP. (3) PRIMARY SECTOR = 50% SECONDARY SECTOR = 15% TERTIARY SECTOR = 35% c) Which approach to calculating GDP is being used here? (1) 3

5 PRODUCTION METHOD/VALUE ADDEDAPROACH QUESTION 3 [9 Marks] 1. Suppose you remove N$2000 from under your mattress and deposit it in your current account at Bank Windhoek. Using a balance sheet, show the impact of your deposit on the bank s assets and liabilities. If the required reserve ratio is 25 percent, what is the maximum amount that the bank lend from this deposit? (5) Balance sheet of Bank Windhoek Assets N$ Liabilities N$ Cash reserves 500 Deposit Loan TOTAL TOTAL Consider this statement: Commercial banks do not create money because this is the central bank s responsibility. Explain. (4) Commercial banks also create through the money multiplier. QUESTION 4 [16 Marks] 1. Complete Table 2 below, which describes the sales tax paid by individuals at various income levels. (8) Table 2 Income (N$) Total Spending Sales Tax Paid Sales Tax as a Percentage of Income % % % % 4

6 2. In each of the following cases, identify the type of policy employed and state whether it is expansionary, restrictive or neutral. (8) a) The government increases taxes. Restrictive fiscal policy b) The central bank increases the repo rate. Restrictive Monetary Policy c) The government decreases government spending. Restrictive Fiscal Policy d) The government increases spending and taxes by the same amount. Neutral Fiscal Policy END OF ASSIGNMENT 1 TOTAL = 50 MARKS 5

7 ASSIGNMENT 2 QUESTION 1 [10 Marks] 1. C 2. A 3. C 4. A 5. B 6. D 7. A 8. D 9. B 10. D QUESTION 2 [15 Marks] Consider the Namibia dollar/us dollar exchange rate. Assume that the exchange rate is currently quoted as N$15 to one US dollar. 1. How many US cents would be required to by N$1? (2) 1 = ±7 US cents If you bought a book for US$30, how much would you have to pay in Namibia dollars terms? (2) = N$ If a Namibian farmer sells a gallon of milk for a net price of US$5, how much would he receive in Namibia dollar terms? (2) 5 15 = N$75 4. If the exchange rate were to change to N$14 to the US dollar, which currency has appreciated and which has depreciated? (2) The Namibia dollar has appreciated and the US dollar has depreciated 5. How much would the book, still costing US$30, cost you now in Namibia dollars? (2) = N$ How much would the farmer in (3) above, receive for his gallon of milk in Namibia dollars after the change in the exchange rate? (2) 5 14 = N$70 7. Explain how a change in the exchange rate results in winners and losers. (3) 6

8 If Namibia dollar appreciates as it did here, imported goods become cheaper and importers benefit. On the other hand, exports become more expensive and less competitive. QUESTION 3 [10 Marks] Study Table 1 below and complete the missing values. (15) Table 1 Real Disposable Income Consumption Saving MPC MPS QUESTION 4 [15 Marks] 1. The table below describes some important macroeconomic data of a country. Read the information and answer the questions that follow. Table Nominal GDP (in billions N$) Price Index (2000 base year) Population (in millions) a) Calculate the real GDP (expressed at constant 2000 prices) for 1980 and (4) ( 200 ) 100 = 400 billion 50 b) By what percentage did GDP increase between 1980 and 2005? (3) 7

9 ( 800 ) 100 = billion 120 c) Calculate the per capita real GDP for this country for 1980 and (4) 400 billion = million d) By what percentage did per capita real GDP increase between 1980 and 2005? (3) 11.1% 2. Consider the following scenarios and classify the type of unemployment being experienced in each case: (3) a) Ndapewa has been a tailor at Okahao Tailoring CC for a few years. She has resigned from her job to move to Windhoek. She is likely to find another job in Windhoek within a month or two. Frictional unemployment b) Tim is an orange picker and only works during the winter season. Seasonal unemployment c) Ishany has been retrenched from her job because of the bad state of the economy, but she has been told to re-apply once the economic condition improves. Cyclical unemployment END OF ASSIGNMENT 2 TOTAL = 50 MARKS END OF TUTORIAL LETTER 8