Question 1. Zandaland is a country with a population of 110 million. Out of this population, the number of retired people is 14 million, the number of people below working age (under 16 years) is 20 million, and the number of people under different types of institutional care is 1 million. In this country, employment amount to 55 million people and unemployment amount to 3 million people. Calculate the following and show your work: (6 Marks)

A. Working-age population (1.5 marks)

B. Unemployment rate (1.5 marks)

C. The economic activity rate (1.5 marks)

D. Employment rate (1.5 marks)

Question 2. How each of the real interest rate ad the nominal interest rate is determined and explain the relationship between these two rates. (4 Marks)

Real interest rate (1 mark)

Nominal interest rate: (1 mark)

The relationship between nominal interest rate and real interest rate: (2 marks)

Question 3. Answer the two following questions: (12 Marks)

A. Explain the four functions of money. (4 Marks)

1. (1 mark)

2. (1 mark)

3. (1 mark)

4. (1 mark)

B. The central bank in a country released the following statistics. Total deposits in banks amounted to $ 500 million, notes and coins outside banks reached $ 100 million and reserves of banks held at the central bank amounted to $50 million. Use these figures to calculate the following: (8 Marks)

1. Calculate the quantity of money (the money supply) (1 mark)

2. Calculate the monetary base (1 mark)

3. Calculate currency drain ratio (2 marks)

4. Calculate the reserve ratio (2 marks)

5. Calculate the money multiplier (2 marks)

Question 4: Define rational expectations and explain the two rational expectation theories of the business cycle. (7 marks)

Definition of rational expectation: (1 mark)

Rational expectations theories.

1. (3 marks)

2. (3 marks)

Question 5. Explain the three accounts of the balance of payment. (6 Marks)

1. (2 marks)

2. (2 marks)

3. (2 marks)

Question 6. In 2020, the United States dollar exchange rate fell by 7.2% against a basket of major currencies. Explain the main causes behind such a fall. (5 Marks)