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Department of Accounting, Finance and Economics (AFE)

2316AFE Macroeconomic Analysis

Assignment – GROUP A

Question 1 (10 marks)

You are a junior economist at the United Nations Development Program (UNDP) and your supervisors would like you to prepare a technical brief on economic growth for several countries for their annual report on economic growth and development in specific regions.

Specifically they would like to know, for each country, the annual growth rate of GDP (including its breakdown following the formula used), and the contribution of the share of GDP that accrues to capital (K) and labour (L).

It is necessary to show all formulas and workings in your brief. Use proper jargon and write as if you are presenting this to your supervisor.

Here is the information available for the hypothetical economy of Macifique:

It’s capital stock has seen an annual growth rate of 1.8%, which is 1.5 times greater than the increase in the labour force.

The labour share of GDP (i.e. output) is 0.60.

A sudden jump in available technology boosted GDP by 2% within the same timeframe.

Question 2 (10 marks)

You are an expert economic commentator for a reputable business newspaper in Macifique, a fully functioning democracy with a politically engaged and aware population with high voter turnout every election, held every 3 years.

The current president is suggesting that in order to boost long-term economic growth, it would be prudent to run an election campaign on the mantra of ‘Greater Savings Today for a Prosperous Tomorrow’. Her rival, on the other hand, is running on a campaign of ‘Increased Consumption Today Boosts Employment for a Prosperous Tomorrow’.

You are to write a short piece on who, in your opinion is (i) more likely to win the election, and (ii) who has the stronger argument for long-term prosperity.

Justify your answers with respect to economic theory/theories and concept(s).

Question 3 (10 marks)

This question refers to Table 4 of the Excel spreadsheet ‘HDI Data’.

A misogynist would, all things being equal, be unhappy to see women do well in terms of economic development as it would be inconsistent with his view of how the world should be. However, on an objective measure (such as HDI measurements), is he actually better off if he lives in a country where the gap in the gender development index in favour of men is large (i.e. groupings 4 and 5), compared to where the gap is small (i.e. groupings 1 and 2)? Consider this proposition and write down your response with suitable evidence to back up your assertions. (10 marks)

Question 4 (10 marks)

You are an intern for the Asian development Bank in Manila. Your immediate supervisor has given you the following table for two hypothetical countries.

You are tasked to, first, calculate and show the cumulative percentage changes of each variable between 1990 and 2000 and the elasticity of each variable with respect to GDP per capita, and to place your figures into the following table.

Second, your immediate supervisor would like you to critically analyse with justification on his proposition that ‘on average, a poor person (and their family) in Europa is better off than a poor person in Asiaca in the year 2000’.

Question 5 (10 marks)

You are an economist at the Finance Ministry of your country. The government has just received information on this day (27 April 2022) that the economy contracted by 1.2% in Q4 2021 (i.e. October-December 2021). Information on the most recent quarter (Q1 2022) covering the period January-March 2022 is still unavailable.

You have been given two tasks by your supervisor regarding the matter above. First, you have been tasked with putting forward a brief whereby you propose using a suitable component of GDP to boost economic growth using the smallest amount of financial resources available. Using your knowledge of multipliers, what would your advice be, both mathematically and argumentatively? Compare and contrast with the alternative available.

Second, your supervisor wants your opinion on any concerns you may have regarding the government’s plan to run expansionary fiscal policy to counteract this economic slowdown. State two concerns and briefly explain them.