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IA-Full-ECO121 - sasc

Macro Economics (Trường Đại học FPT)

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Individual Assignment ECO121

Your Name: Lưu Tấấn Tài
Roll Number: CE171016

Chapter 23
A U.S.-owned car factory in Mexico produces $5 million of cars. $2.5 million of these
cars are sold in Mexico and the other $2.5 million are sold in the U.S. In both cases $1
million of the value of the cars was due to U.S-owned equipment located in Mexico
and U.S. managers working in Mexico. How much did this production contribute to
U.S. GDP?
Answers:
Gross Domestic Product (GDP) measures the value of goods and services produced
within a country’s borders. In this case, the production contributed $2.5 million to
U.S. GDP from the cars sold in the U.S., plus $1 million from the value of U.S.-owned
equipment located in Mexico and U.S. managers working in Mexico. So, this
production contributed a total of $3.5 million to U.S. GDP.
Chapter 24
Suppose a basket of goods and services has been selected to calculate the CPI and
2012 has been selected as the base year. In 2012, the basket’s cost was $50; in 2014,
the basket’s cost was $51; and in 2016, the basket’s cost was $52. What was the
value of the CPI in 2014?
Answers:
CPI in base year = 50
CPI (2014) = 51/50 x 100 = 102

Chapter 28
In 2015 the Japanese adult non-institutionalized population was 110.7 million, the
labor force was 66 million, and the number of people employed was 63.7 million.
According to these numbers, the Japanese labor-force participation rate and
unemployment rate were about
Answers:
Lf = (66 million / 110.7 million) * 100% ≈ 59.62%.
ER = 66 million - 63.7 million = 2.3 million.
UR= (2.3 million / 66 million) * 100% ≈ 3.48%.
Chapter 25
What are determinants of productivity? How can we improve productivity? Give
short answers.
Answers:

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There are four main determinants of productivity: physical capital, human capital,
natural resources, and technological knowledge . Physical capital refers to the stock
of equipment and structures that are used to produce goods and services. Human
capital refers to the knowledge and skills that workers acquire through education,
training, and experience.
Chapter 29
1. What are the differences between M1 and M2?
2. Suppose that reserve requirment ratio is 25% and public hold 1 billion USD,
calculate Money supply?
Answers:
1. The main difference between M1 and M2 is the types of assets included in
each measure. M1 includes the most liquid assets, such as cash, checking accounts,
and traveler's checks. M2 includes all of the assets in M1, as well as less liquid
assets, such as savings accounts, money market accounts, and small time deposits.

2. 1/ 0.25 = 4. This means that for every dollar deposited in a bank, the money
supply can increase by up to 4 dollars through loans and subsequent deposits.

If the public holds 1 billion USD in deposits and the reserve requirement ratio is 25%,
then the maximum money supply would be 1 billion USD * 4 = 4 billion USD., if the
public holds 1 billion USD, the money supply would be 4 billion USD.

Chapter 30
1. What are the differences between norminal wage and real wage?
2. The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent.
What is the real interest rate?
Answers:

1. Nominal wage is the wage stated in current dollars, while real wage is the
wage adjusted for inflation. Real wage is calculated by dividing the nominal
wage by the price level index.

2. Real Interest Rate = Nominal Interest Rate - Inflation Rate

Real Interest Rate = 3.5% - 1.5% = 2%

Therefore, the real interest rate is 2%.

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Chapter 3

Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.

Hours Needed to Make 1 Quantity Produced in 2400 Hours

Car Airplane Cars Airplanes
Japan 30 150 80 16
Korea 50 150 48 16
Compute Japan and Korea opportunity cost of one airplane ?
Answers:
Therefor Japan, the opportunity cost of one airplane is:
(80 cars / 16 airplanes) = 5 cars per airplane
Therefore, Japan would have to give up 5 cars to produce one airplane.
For Korea, the opportunity cost of one airplane is:
(48 cars / 16 airplanes) = 3 cars per airplane
Therefore, Korea would have to give up 3 cars to produce one airplane.
Chapter 31
1. Suppose you are American, an Iphone is 999$ in the US and it is 25,000,000
VNĐ in Vietnam. The exchange rate of USD to VND is 23,150. Compute the real
exchange rate.
2. Last year a country had exports of $50 billion, imports of $60 billion, and
domestic investment of $40 billion. What was its saving last year? Answer:
Answers:
1. Real Exchange Rate = (Price of iPhone in Vietnam) / (Price of iPhone in US *
Nominal Exchange Rate) = (25,000,000 VNĐ) / (999 USD * 23,150 VNĐ/USD) ≈
1.09
2. Savings = Investment + Net exports =40 +(50 -60)= $30 billion
Chapter 32
3. Suppose the policy makes people decrease their investment. What is the
effect to:
a. Interest rate?
b. NCO?
c. Real exchange rate?
d. NX?
Answers:
a. Decrease

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b. Increase
c. Decrease
d. Increase
Chapter 33
3. What things make LRAS to shift?
Answers:
The Long-Run Aggregate Supply (LRAS) curve shifts when there is a change in the
number or quality of resources (factors of production). This can include changes
such as a larger labor force, more capital, more natural resources, better
technology that increases productivity of labor and capital 1. An increase in
investment or growth in the size of the labour force would shift the LRAS curve to
the right
Chapter 34
1. If the real-estate market increases fastly, what will happen to the output?
What should the Government do?
2. What should the Government do in recession?
Answers:

1. If the real-estate market increases rapidly, it can lead to a surge in house prices
which may not be affordable for many people. This can cause an economic
slowdown, as people may not be able to purchase other goods and services
due to higher housing costs. To help prevent this, the Government should
implement policies such as rent control, taxation of foreign buyers or
increasing the supply of housing units. These measures can help keep the
market from overheating and ensure that housing is still affordable.

2. In a recession, the government should implement policies to increase demand,

provide support to businesses, reduce taxes and increase government spending
to stimulate the economy.

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