Question Caribbean country to focus on is Barbados 1

SECTION B: Macroeconomics (70 marks) - Units 7, 8 and 9 Question 2 - Computation and Short Answer

Show ALL workings for each part of this question. (a) Calculate GDP using the Income or Expenditure Approach. (all figures are in billions of dollars): Item Government purchase of goods and services Exports Receipts of factor income from the rest of the world Depreciation (consumption of fixed capital) Net fixed Investments Corporate income taxes Consumption expenditures Indirect business taxes Imports Payments of factor income to the rest of the world Inventory change Social security contributions Undistributed corporate profits (retained earnings) Government transfer and interest payments Personal interest payments Personal taxes (b) Using the following data calculate: (i) The number of persons employed. (ii) The number of persons unemployed. (iii) The labour force. (iv) The Labour Force Participation rate. (v) The "official" unemployment rate. Amount ($) 1,721.6 1,096.3 382.7 990.8 688.2 265.2 6,739.4 664.6 1,475.8 343.7 56.5 702.7 130.3 1,366.3 286.2 1,235.7

987,156 Currently Working 9845 (ages 13-14) looking for work 45,600 Part-Time workers 234 Self-Employed 67,432 (ages 23-25) looking for work 544,321 (ages 16-20) looking for work 5654 Temp Workers 543 recent university graduates that are going back to graduate school 23,000 volunteer workers 12,000 (ages 15) looking for work 56 family workers who worked 15 hrs a week 6543 Discouraged Workers 67,890 laid off receptionists looking for work Current population is 6,000,000 5000 armed forces 3500 institutionalized

(c) Suppose that 20,000 of the employed switches to jobs in the underground economy. When interviewed by STATIN, 50% of these switchers report that they are not working and not seeking work, while the other 50% report that they are not working but seeking work. Explain what happens to the official unemployment rate and the "true" unemployment rate. (d) Illustrate and carefully explain the impact of an increase in the income tax rate from 25 percent to 35 percent on the demand for labour, supply of labour, equilibrium wage and level of employment. (e)The central bank of your assigned Caribbean country decides to pursue an expansionary monetary policy. (i) Identify one possible action they could take.

(ii) Carefully explain, in as much detail as possible, how the chosen action will impact the money market.

(iii) Illustrate the overall impact of the chosen action on the money market. (iv) Identify a newspaper article in your assigned Caribbean country that provides a situation in which an expansionary monetary policy was implemented by the central bank. Ensure that you provide a screenshot of the article in your submission. (f) With the aid of a well labelled diagram, carefully explain the impact on the money market if there was a discovery of gold that fuels inflation.

Question 3 - Data Analysis and Short Essay Complete a table showing the unemployment rate, inflation rate and economic growth rate for 2009 - 2018 for your assigned Caribbean country and illustrate on a line graph. Note: ONE graph should be done showing all three variables. (a) Examine the data for your assigned country from 2009 to 2018. What relationship (positive, negative, none) do you observe between (i) economic growth and unemployment, (ii) economic growth and inflation, (iii) unemployment and inflation over the period? Justify your response. (6 marks) Justification Variables (i) economic growth and unemployment (ii) economic growth and inflation (iii) unemployment and inflation over the period Relationship (b) Rank the three economic variables from most important to least important. Provide one relevant reason to justify your selection for each of the three positions. (I.e. a reason why each variable is placed at position 1, 2 and 3.) Rank Variable Justification 1 2 3 (c) "Many believe that the main objective of government economic policy should be to increase productivity and economic growth." Using the data above and your economic knowledge, critically evaluate this statement by providing THREE reasons for and THREE reasons against. Ensure that you provide a relevant real-world example from the given Caribbean economy to support EACH point.