ECO104 ASSIGNMENT

Instructions: Hand written answers will be accepted only. You must turn in one file only by the deadline.

1. What is productivity? Describe the factors of productivity.

2. Let’s consider a hypothetical economy where this year’s money supply is Tk.300, nominal GDP is
Tk. 120000 and real GDP is Tk. 6000.
a) What does the quantity theory of money say?
b) Calculate the price level.
c) Calculate the velocity of money.
d) Suppose the central bank changes the money supply so that the new money supply is Tk. 400, calculate the new
price level.

3. Show using the AD-AS model what happens to price level and output in an economy if there is an,
a) increase in taxes
b) increase in physical capital

4. a) What does the Keynesian Theory of Liquidity Preference say?

b) Suppose the government of a country increases spending on roads and highways by 800 crore taka. Show
graphically and explain why might this shift be larger than 800 crore taka.