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Assignment Sept2023

The document provides instructions for an individual assignment due on September 15th or 22nd, 2023 worth 50% of the grade. It includes 6 questions covering topics like calculating changes in the consumer price index and general price level, calculating bank reserves and credit creation, interpreting graphs about income inequality, calculating real GDP and exchange rates, types of unemployment, and deriving a total expenditure function.

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Cornel Visser
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© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
21 views

Assignment Sept2023

The document provides instructions for an individual assignment due on September 15th or 22nd, 2023 worth 50% of the grade. It includes 6 questions covering topics like calculating changes in the consumer price index and general price level, calculating bank reserves and credit creation, interpreting graphs about income inequality, calculating real GDP and exchange rates, types of unemployment, and deriving a total expenditure function.

Uploaded by

Cornel Visser
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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ENMB1627

INDIVIDUAL ASSIGNMENT
DUE DATE: 15 OR 22 September 2023
TOTAL= 40/ WEIGHT = 50%

INSTRUCTIONS
- The assignment must be typed and submitted with the official BML cover page.
- Graphs must be drawn electronically, alternatively if graphs are drawn by hand
it must be scanned under the relevant question (NO PICS OF GRAPHS ARE
ALLOWED)!
- Material to be used:
– Macroeconomics- 2nd SA Edition, Mankiw, Taylor, Campher, Ncwadi,
2018. Cengage
– Lecture slides; Class activities
- Please do NOT plagiarise! (Zero if you do!)
- Remember this is an individual (NOT A GROUP) assignment!

QUESTION 1 [5 Marks]
1.1 Suppose the Consumer Price Index (CPI) for 2017 was 105.48 and in 2018 it is 92.48.
1.1.1 Calculate the change in the general price level between these two years. (2)
1.1.2 Which term will explain this change in the general price level? (1)
1.1.3 Is the price phenomenon calculated in 1.1.2 present during economic upswings or -
downswings? Explain (briefly) how aggregate demand might have changed to cause
such a change in general price level? (2)

QUESTION 2 [6 Marks]

2.1 A bank, called DEBT Bank, has cheque deposits of R100 000 and a total of R80 000 that
it can loan out. It also has excess reserves amounting to R5 000.
2.1.1 Calculate the required reserves for DEBT Bank. (3)
2.1.2 Calculate the reserve requirement ratio (percentage). (1)
2.1.3 Calculate the maximum amount of credit that DEBT Bank can create given its
available deposits. (2)

1
QUESTION 3 [4 Marks]

Questions 3.1 - 3.3 refer to the graph below.

Inequality (2006)
Inequality (2009)
Perfect Inequality
Percentage of Income

Percentage of Households

3.1 In which of the two mentioned years (2006 or 2009) is the value of the Gini coefficient
closer to one? Explain your answer. (2)
3.2 Did the distribution of income in South Africa become less unequal or more unequal
since 2006? (1)
3.3 Classify the following approach to define poverty; “Individuals and groups are
partially or completely excluded and cannot participate in the community”. (1)

QUESTION 4 [5 Marks]
Assume that the table below contains information on Consumer Price Index for South Africa.

Year Consumer Price Index


2016 100,0
2017 112,1
2018 120,8

4.1 If the computed annual inflation rate in 2019 is 8%, what is the CPI in 2019? (2)
4.2 Given the inflation targeting approach that the South African Reserve Bank (SARB)
follows and the 8% inflation rate in 2019, indicate whether or not the Monetary Policy
Committee (MPC) will increase or a decrease in repo rate. (1)

4.3 Illustrate graphically using the money supply and money demand curves, the effect of the
action taken by the MPC in 4.2 on the level of interest rate. (2)

2
QUESTION 5: [10 Marks]
5.1 The table below shows the Gross Domestic Product (GDP) of a hypothetical economy for
the years 2002 and 2014. Use 2002 as the base year and answer the questions below:
Average prices in Rands Quantity sold
Year 2002 2014 2002 2014
Food 12 16 4 5
Housing 9 13 3 3
Fun 4 7 3 4
Machines 20 22 2 2

5.1.1 Calculate the nominal GDP for this economy in the year 2002. [2]
5.1.2 Calculate the real GDP for this economy in the year 2014. [2]
5.1.3 What is the percentage change in real GDP from year 2002 to 2014? Is it a growth or
decline in real GDP? [2]

5.2 Consider the rand/dollar exchange rate and focus on the market for dollars. Make use of
supply and demand curves and determine whether the dollar would appreciate/depreciate
against the rand if more foreign tourists were to visit South Africa. [4]

QUESTION 6: [10 Marks]


6.1 Indicate which type of unemployment these following events would affect and indicate
why?
A. All retail stores in South Africa adopt the use of a self-service cashier system. (1)
B. Political instability in South Africa reduces the level of investment leading to a fall in
the aggregate output below potential output. (1)
C. The financial sector needs to hire more commerce graduates however a large share of
graduates qualify for nursing. (1)
D. Mining companies in South Africa can no longer extract minerals profitably and as a
result, have to lay off 20% of their miners all of who have at most a grade 10 level of
education. (1)

6.2 Use the following information and answer the questions that follow.
C = 1860 + 0,91Y
I = 1200
G = 1550
X = 890
M = 670

6.2.1 Calculate and write down the Total Expenditure (TE) function of this economy. (2)
6.2.2 Calculate the equilibrium level of income AND graphically illustrate both the TE
function from 6.2.1 and the equilibrium level of income. (4)

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