Tutorial 1 OPTION 1 TOTAL MARKS 40 Identify three macroeconomic issues that have been in the news recently (3marks) What does the assumption of market clearing imply Explain (2marks) How applicable is this assumption to the labour market in the long run Explain (2 marks) and short run Explain (2 marks) How applicable is this assumption to the market for fast food meals in the long run Explain (2 marks) Short run Explain (2 marks) Define fiscal deficit (1 marks) Explain why this economic statistic is so closely monitored in small fixed exchange rate economies (4marks) Give two reasons Place each of the following transactions in one of the four components of expenditure consumption, investment, government purchases, and exports imports (1 mark each) Island Manufacturers (Jamaica) sells furniture to the Hilton Hotel in Barbados Island Manufacturers (Jamaica) sells furniture to St Micheal Golf Resort in Barbados Island Manufacturers (Jamaica) sells furniture to John Doe Island Manufacturers (Jamaica) sells furniture to the Jamaican Government Island Manufacturers (Jamaica) builds a new line of home furniture to be sold next year Consider an economy that produces and consumes bread and automobiles In the following table are data for two different years Year 2000 2010 Price of an automobile $40,000 $50,000 Price of a loaf bread $20 $30 Number of auto mobiles produced 100 cars 120 cars Number of loaves of bread produced 600,000 loaves 500,000 loaves Using the year 2000, compute the following statistics for each year nominal GDP, real GDP, the implicit price deflator for GDP, and a fixed weight price index such as CPI ( 10marks) How much have prices risen between year 2000 and year 2010 ( 1marks) Compare answers given by Laspeyres and Passche price indices ( 4marks) Suppose you are a senior public servant writing a bill to index Social Security and pensions That is your bill will adjust these benefits to offset changes in the cost of living Will you use the GDP deflator or the CPI Explain ( 2marks)

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Tutorial#:1

OPTION #1

TOTAL MARKS: 40

Identify three macroeconomic issues that have been in the news recently.(3marks)
What does the assumption of market clearing imply? Explain(2marks)How applicable is this assumption to the labour market in the long run?Explain(2 marks)and short run? Explain(2 marks). How applicable is this assumption to the market for fast food meals in the long run? Explain(2 marks)Short run? Explain(2 marks)
Define fiscal deficit?(1 marks)Explain why this economic statistic is so closely monitored in small fixed exchange rate economies?(4marks)Give two reasons
Place each of the following transactions in one of the four components of expenditure: consumption, investment, government purchases, and exports/imports.(1 mark each)
Island Manufacturers (Jamaica) sells furniture to the Hilton Hotel in Barbados.
Island Manufacturers (Jamaica) sells furniture to St Micheal Golf Resort in Barbados
Island Manufacturers (Jamaica) sells furniture to John Doe.
Island Manufacturers (Jamaica) sells furniture to the Jamaican Government.
Island Manufacturers (Jamaica) builds a new line of home furniture to be sold next year.
Consider an economy that produces and consumes bread and automobiles. In the following table are data for two different years.

Year 2000 2010

Price of an automobile $40,000 $50,000

Price of a loaf bread $20 $30

Number of auto-mobiles produced 100 cars 120 cars

Number of loaves of bread produced 600,000 loaves 500,000 loaves

Using the year 2000, compute the following statistics for each year: nominal GDP, real GDP, the implicit price deflator for GDP, and a fixed-weight price index such as CPI.(10marks)
How much have prices risen between year 2000 and year 2010? (1marks)Compare answers given by Laspeyres and Passche price indices. (4marks)
Suppose you are a senior public servant writing a bill to index Social Security and pensions. That is your bill will adjust these benefits to offset changes in the cost of living. Will you use the GDP deflator or the CPI? Explain (2marks)