NEWEcon1103-008 - Final Answers - Students - W21(1)

Department of Economics, Justice, and Policy Studies 4825 Mount Royal Gate SW, Calgary, AB, Canada T3E 6K6 _________________________________________________________________________ ECON 1103-008 Principles of Macroeconomics Final Exam Answers Instructors: Dr. David R. Sabiston Winter 2021 __________________________________________________________________________________ __ 1 Student Name: Aqusa Butt Student ID#: __201693643__ __________________________________________________________________________________ __ 1 1 PART A: Multiple Choice Questions (45 questions @ 1 mark each = 45 marks) Select the BEST answer from each of the test questions and record it the following table: 1. A 6. B 11. A 16. A 21. B 26. B 31. D 36. B 41. B 2. A 7. D 12. C 17. D 22. D 27. A 32. A 37. C 42. D 3. C 8. B 13. A 18. A 23. B 28. C 33. A 38. A 43. C 4. C 9. B 14. C 19. B 24. D 29. C 34. B 39. D 44. C 5. B 10. D 15. C 20. A 25. D 30. B 35. D 40. B 45. C

PART B: Math, Graph and/or Applications Questions (3 questions @ 15 marks each = 45 marks) Answer all parts of THREE of the following FIVE questions SHOW ALL YOUR WORK. Please delete the two questions that you are NOT answering. B1. National Income Accounting 1Suppose you are given the following table with certain variables collected by Statistics Canada over a given year ($millions): 1. Capital consumption allowances $195,229 2. Personal expenditure on consumer goods and services $852,770 3. Personal income taxes $267,360 4. Government business enterprise profits before taxes $15,539 5. Gross Investment $311,496 6. Taxes less subsidies on products $99,428 7. Corporation profits before taxes $203,231 8. Employment insurance benefits $8,778 9. Government expenditure on goods and services $342,198 10. Exports $532,118 11. Inventory valuation adjustment $3,272 12. Taxes less subsidies on factors of production $67,921 13. Canada pension plan deductions $76,505 14. Net income of non-farm unincorporated business, including rent $90,363 15. Accrued net income of farm operators from farm production $110 16. Imports $502,255 17. Wages, salaries and supplementary labour income $788,357 18. Transfer payments from federal government $206,502 19. Interest and miscellaneous investment income $71,515 (a) Calculate the Gross Domestic Product (GDP) using both the expenditure/output approach as well as the income approach. ( 12 marks) Hint: (1) the “Statistical Discrepancy” for each approach is not given; hence the two values will differ & (2) do you really need all these categories?! Expenditure/output approach: 2

B2. Unemployment and the Labour Force The following data describes the Alberta economy in 2015 and 2020: 2015 2020 Population 4.16 million 4.43 million Labour force 2.90 million 2.40 million Unemployment rate 7.0% 11.0% Participation rate 71.8% 68.6% (a) What is the number of unemployed persons in each year? ( 2 marks ) 2015: (0.07* 2.90) = 0.203 million 2020: (0.11* 2.40) = 0.264 million 2015 2020 Unemployed persons 203,000 264,000 (b) What is the number of employed persons in each year? ( 2 marks ) 2015: 2,900,000 – 203,000 = 2,697,000 2020: 2,400,000 – 264,000 = 2,136,000 2015 2020 Employed persons 2,697,000 2,136,000 (c) How many people in Alberta are eligible to be in the labour force? ( 4 marks) Anyone who is unemployed but actively looking for work is eligible, and anyone employed. (d) Suppose that in 2020, 78,000 unemployed workers now became “discouraged workers”. i. What would be the number of unemployed workers? ( 2.5 marks) 264,00 – 78,000 = 186,000 There are 186,000 unemployed workers 4

ii. What would be the number of employed workers? ( 2.5 marks) The number of employed workers will stay the same, 2,136,000 . iii. What would be the rate of unemployment? ( 2 marks) 186,000 + 2,136,000 = 2,322,000 (186,000/2,322,000) * 100 = 8.01 The rate of unemployment in 2020 is 8.01 1 B4 . Money, Banking, and Reserves Suppose that Charter Bank A has an initial balance shown below: 1 Balance Sheet of Bank A Assets Liabilities Reserves 20,000 Deposits 200,000 Loans 180,000 Assuming that all chartered banks’ target reserve ratios are 10%, they do not hold any excess reserves and that the public holds a fixed amount of currency: (a) 1Show what initially happens to the balance sheet for Bank A when one of its customers, Jack, withdraws $2,000 and deposits this amount in his Swiss bank account. What is the status of Bank A’s reserves (excess or deficient)? By how much? ( 3 marks ) Balance Sheet of Bank A Assets Liabilities Reserves 18,000 Deposits 198,000 Loans 180,000 Total 198,000 Amount of excess reserve = 18,000- 10% *198,000 = -1800 5