You are required to prepare a short essay (of 700-1000 words) by analysing the
relationship between macroeconomic indicators of your own interest from the data
provided via blackboard. This is your opportunity to “think like an economist” and to
show how economic analysis can inform our understanding of macroeconomic issues.
Potential Macroeconomic Indicators for Analysis (some of those that we discuss in
class):
? Consumption, Investment, Government Spending and Exports
? Real GDP, Nominal GDP and GDP Deflator
? Consumer Price Index and Producer Price Index
? Unemployment rate and Labour Force Participation rate
? Money Growth and Inflation
? Inflation and Unemployment
Some potential macroeconomic issues for analysis:
? Does higher GDP growth lead to lower unemployment?
? Does higher inflation lead to lower GDP growth?
? Does higher exports lead to higher GDP growth?
? Does higher money growth lead to higher inflation?
1. Suppose you have $200,000 in a bank term account. You earn 5% interest per
annum from this account.
You anticipate that the inflation rate will be 4% during the year. However, the
actual inflation rate for the year is 6%.
Calculate the impact of inflation on the bank term deposit you have and
examine the effects of inflation in your city of residence with attention to food
and accommodation expenses.
2. The Australian Bureau of Statistics (ABS) reported in May 2017 that the civilian
population in Australia over 15 years of age was 20.8 million.
Of this population of 20.8 million Australians, 13.5 million were employed and
0.7 million were unemployed.
Calculate Australia’s labour force and the number of people in the civilian
population who were not in the labour force? Also, with examples examine the
causes of structural unemployment in Australia
1. The COVID-19 pandemic has led to shutdown of many businesses and high unemployment in the US. Meanwhile, surgical masks are in high demand. Suppose in this context, SM Inc., a producer of surgical masks, had managed to overcome the health hazard and continue its operations, producing $15 million worth of masks during first quarter of 2020 (2020Q1). It sold all its production in that quarter as well as $5 million worth of masks that it had in its inventory at the beginning of the year and that were produced in 2019. If the production cost of these inventory masks in 2019 was $4 million, how much did the activities of SM Inc. contribute to the GDP in 2020Q1? Please remember to explain your answer in detail in addition to providing the calculated answer. [15] Answer: 2. Under the chain rule, we compare the GDP of each two consecutive years in terms of prices that prevail in the earlier year. For example, to compare 2017 and 2018, we must first calculate GDP in both years in 2017 prices. Consider an economy that produces only two goods, bread and cheese. The following statistics are available about this economy. In the following questions, round your answers to two decimal places.
(a) Explain how GDP is measured in your country. Provide real life examples. (4 marks)
While your textbook is your first point of reference, you should consult other references in order to receive full marks. Use real life examples (with references) to support your discussion.
(b) Explain the macroeconomic effects of COVID-19 pandemic on your country using economic theory, real life data and illustrate them on appropriate diagrams. (10 marks)
This is your case study that you need to describe in details, provide relevant information, use table, diagrams where appropriate. You should use real data as much as possible. Refer to the textbook for the theoretical framework.
(b) Using your home country as a case study outline two main economic measures government applied to the national economy due to COVID-19 pandemic. Analyse the effect of such measures on inflation, output and employment using economic theory. What measures would you suggest and why? Explain using theory and real data. (12 marks)
During the current COVID-19 pandemic many countries have imposed quarantine on their
populations in order to limit/ stop the spread of the disease and avoid overload on the health
system. While these measures are justified from the health perspective, they have major economic
consequences. In this assignment you are asked to analyse different economic aspects related to the
COVID-19 pandemic.
Part 1 (20 marks)
GDP and unemployment
a) Analyse the effects of quarantine on GDP, employment and the unemployment rate. Which
industries are likely to be most affected and which industries are likely to be least affected
by quarantine measures?
b) Choose any country that introduced quarantine as an example. What was its GDP growth
rate in 2018, 2019? (Indicate the source of information.) Is this country likely to be in
recession this year? Refer to two definitions of recession.
c) Are your answers consistent with (general) Okun’s law?
Part 2 (20 marks)
Inflation
a) What do you think would happen to inflation in your chosen country in the coming year?
Explain.
Demand components: Consumption
b) What factors usually determine individual consumption? In light of these factors analyse
how the situation with the COVID-19 pandemic is likely to affect aggregate consumption.
Use the theory studied in the course in your answer. You may want to provide some
examples for your chosen country.
a. In the country of Classica, we have the following information for the year 2012:
*Consumption stood at $1 billion dollars’ worth of new goods and services, 20% of which were bought by foreigners residing there.
*New housing stock worth $100 million was sold.
*Company profit totalled $200 million.
*Businesses bought $150 million dollars’ worth of bonds.
*The government of Classica bought $200 million worth of guns for the military.
*Citizens of Classica living overseas bought $50 million worth of goods from Classica.
(I) Calculate and explain how you obtained the figure (i.e. what did you count, and what did you exclude) for Classica’s consumption in 2012
(ii) Calculate and explain how you obtained the figure (i.e. what did you count, and what did you exclude) for Classica’s investment in 2012
(iii) What was Classica’s GDP in 2012? Explain your answer
Your manager has asked you to provide 7 to 8 PowerPoint slides, using the key Macroeconomic Variables and their relevant factors (L1 & L2) and then applying them to a Macroeconomic model (L2 & L3) to argue for the above. You are also required to further comment on the key macroeconomic indicators (L1). Based on your assessment, make a forecast of how our Central Bank (RBA) may move the cash rate (L4) in the next 6 months.
Assignment Totals (20%)
Part 1: Group (4 members): Prepare 7 to 8 PowerPoint slides (10%), including the reference list, due in week 6 (teaching week commencing 20 April 2020) to your lecturer by email. Written submission of PowerPoint slides only, no class presentation required.
Note: use dot points to present the information
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Part 2: Individual Memos (5% content; 5% language) due in week 9 (teaching week commencing 18 May 2020) to your lecturer by email.
Write a memo of 500 words (2 pages excluding the reference list) from the above power point slides to brief your manager on the current Australian economy, including making a forecast on the Australian economy and the cash rate. (2 pages, excluding the reference list, font size 12 with 1.5 line spacing. No visual data or charts).
*You are required to submit two hard copies. One for the language marker and one for the content marker. You are also required to submit an electronic copy to your lecturer.
1 SOE11444 Global Business Economics and Finance Project 1 Assessment A. Project question A major multinational corporation has appointed you as an economic advisor. You are requested to compile a report regarding the macroeconomic environment in two countries where the firm operates and explain how it might affect the company’s economic activity. B. Project specifications 1. You may choose to focus your analysis on any existing firm with international activity that can be of different types in the two countries. 2. The two countries must be chosen from section C below as follows: one country from List 1 and one country from List 2. 3. Your report must include: a. A brief description of the company and the product/market it operates in for both countries. b. An analysis of the market structure in which your company operates for the two countries. c. A comparative analysis of all major macroeconomic indicators (see section D below, excluding 5 and 8) for the two countries and their overall impact on firm’s economic activity. d. An analysis of the monetary and fiscal policy (instruments) for the two countries and their impact on the firm’s economic activity. You must include here an analysis of the interest rates (Section D, indicator 5). e. An analysis of the foreign trade policy instruments (international trade agreements) for the two countries and their impact on firm’s economic activity. You should include here an analysis of the exchange rates (Section D, indicator 8). 2 C. Country Lists List 1 List 2 Germany China France India United Kingdom Brazil United States Russia Japan Mexico D. Macroeconomic indicators1 to be analysed (the last available 10 years): 1. GDP growth rate 2. GDP per capita at constant prices 3. Inflation rate (CPI) 4. Unemployment rate (ILO measure) 5. Interest rate (Monetary Policy Rate)2 6. General government balances (% of GDP) 7. Balance of Payments (% of GDP) 8. Exchange rates (National Currency/USD OR National Currency/Euro)3 1 We recommend that you use the IMF database to collect your data for most of these macroeconomic indicators. 2 Data available from the relevant Central Banks websites 3 ibid 3 E. Project 1 Submission Guidelines Length 2,500 words, +/- 10% (excluding tables, graphs, footnotes and references) Presentation Arial 12 fonts, 1 ½ spacing, justified text References A minimum of 20 references using APA Referencing Style (textbooks, official data and information sources) F. Marking criteria and weights CRITERIA WEIGHTS Brief description of the company and analysis of the market structure in which the company operates for the two countries 20% Data collection, comparative analysis of major macroeconomic indicators and impact on firm’s economic activity 25% Analysis of the monetary, fiscal and foreign trade policy for the two countries and their impact on firm’s economic activity 40% Report structure, presentation and references 15%