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DIM1363 – MACROECONMICS
CLO 1 [80]
SEM JAN 2024 (SET 1)
SECTION A
1. C 6. B 11. C 16. B
2. B 7. C 12. C 17. D
TN 1-5 3. B 8. A 13. C 18. A
4. D 9. B 14. B 19. D
5. B 10. A 15. A 20. A
SECTION B
TN3 QUESTION 1
a) GDP MP = agriculture + construction+ manufacturing + gas & electricity +
banking + government service + wholesale √=0.75
= 10√ + 45√ + 50 √ + 30√+ 80√+30√ +70√ = 315√ 6
b) GNPmp = GDP MP + net factor income abroad √=1
= 315√ +25√= 340√ 3
c) GNPFC = GNPmp – indirect tax + subsidies √=1
= 340√ -5√ + 10√ = 345√ 3
d) NI= GNPFC – depreciation √=1
= 345√ – 5√ = 340√ 3
e) PI = NI + transfer payment – EPF – corporate tax √=0.6
= 340√ + 6√ – 3√ – 7√ = 336√ 3
f) DP= PI – personal income tax
= 336√ – 4√ = 332 √=1
2
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TN4 QUESTION 2
a) MPS = 1- MPC 2
= 1-0.75 = 0.25
2
b) S = -400 + 0.25Yd
c) Y = C+I+G+ (X-M) 1
Y = [400+0.75(Y-20)] +200+130+(125) 1
Y = 855 + 0.75Y – 15 1
Y – 0.75Y= 840 1
0.25Y= 840 1
Y=840 / 0.3=0.25 1
Y= USD3,360million
(d) Y=AE
C+I+G+(X-M) √
400+0.75Yd√
√=0.8
√ 840 4mk
√ 400
√ 3360
(e) ∆Y = 1/(1-MPC) x ∆I 1
1
= 1 / (1-0.75 ) x 50 1
= 200
1
New equilibrium income = Y + ∆Y
= USD3360million + USD 200 million 1
= USD3560million 1
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TN5 Question 3
(a) National budget is a document containing a preliminary approval plan of public 2
revenue and expenditure in a year. 3 budget:
1. Balanced budget – occurs when government total expenditure is equal to its
2
total revenue.
2. Surplus budget – occurs when the government’s total revenue is more than its 2
total expenditure. Government can pay up its debts or earn interest on funds.
3. Deficit budget – occurs when the government’s total expenditure is more than 2
its total revenue. Government must either borrow from external or internal
sources.
(b) Any 3 internal sources of public borrowing:
1. Borrowing from citizens through the sale of securities, bonds and saving
certificates to citizens.
2. Borrowing from financial institution such as insurance companies by investing
their resources in the purchase of government securities. 3x2=6mk
3. Loan from the central bank through sale of securities, bonds and debentures from
the government.
4. Loan from commercial bank where commercial banks invest a part of their
deposits in government bonds and securities to fulfil liquidity requirements.
3 external sources of public borrowing:
1. International money market such as some foreign exchange bank in Paris, London
and New York.
3x2=6mk
2. Currency loan from foreign government such as USA, Uk and Germany.
3. Loans from international financial institution such as IMF, which give loans to its
members on a short term basis.
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TN6 Question 4
1. Frictional unemployment 1
Frictional unemployment is the time a worker spends between jobs. Examples of this
include a freelance developer whose contract has ended (without another gig waiting), a 4
recent college grad seeking his first job, or a mother returning to the workforce after
raising a family. In each of these instances, it will take time and resources (friction) for
that person to find a new job. In general, however, economists regard this kind of
unemployment as a sign of a healthy jobs market as long as it's low; that means people
seeking work are having a fairly easy time finding it.
2. Cyclical Unemployment 1
Cyclical unemployment occurs during downturns in the business cycle when demand for
goods and services declines and companies respond by cutting production and laying off
4
workers. When this happens, there are more workers than there are available jobs;
unemployment is the result. Cyclical unemployment may be short-term, lasting mere
weeks for some people, or long-term. It all depends on the degree of the economic
downturn and what industries are most affected.
1
3. Structural Unemployment
Structural unemployment is the most serious kind of unemployment because it points to 4
seismic changes in an economy. It occurs when a person is ready and willing to work, but
cannot find employment because none is available or they lack the skills to be hired for the
jobs that do exist. Oftentimes, these people may be jobless for months or years and may
drop out of the workforce entirely. This kind of unemployment may be caused by
automation that eliminates a job held by a person, such as when a welder on an assembly
line is replaced by a robot. It may also be caused by the collapse or decline of an important
industry due to globalization as jobs are shipped overseas in pursuit of lower labour costs.
4. Seasonal Unemployment 1
Seasonal unemployment occurs when the demand for workers varies over the course of
the year.bIt can be thought of as a form of structural unemployment because the skills of 4
the seasonal employees are not needed in certain labour markets for at least some part of
the year.The construction market in northern climates depends on the season in a way it
doesn't in warmer climates, for example. Seasonal unemployment is viewed as less
problematic than regular structural unemployment, mainly because the demand for
seasonal skills hasn't gone away forever and resurfaces in a fairly predictable pattern.
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