ECO121 - Assignment 02 - Nguyen Thanh Tam

ECO121 Macroeconomics
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Term: Fall2023
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STUDENT INFORMATION
Name: TRỊNH TUẤN HẢI Roll number: HE171437
Room No: Class: MKT1820
FOR TEACHER ONLY

MARK MARKED BY Signature of Proctor
(NAME AND SIGNATURE)
Assignment 2
Question1:
Assume that in the Economy only two goods are produced: Pencils and Erasers. Macroeconomics
information for this economy is given in the below
a. What is the value of Nominal GDP in 2011 and 2012? What is the percentage increase?
Nominal GDP in 2011 = 100 x $1 + 200 x $1 = $300
Nominal GDP in 2012 = 110 x $1.5 + 220 x $1.1= $407
% increase= [(Nominal GDP in 2012 - Nominal GDP in 2011)/ Nominal GDP in 2011] x100%=
35.67%
b. What is the value of Real GDP in 2011 and 2012, by considering 2011 as the base year? What is
the percentage increase?
Real GDP in 2012 = 110 x $1.00 + 220 x $1.00 = $330
Percentage increase = [($330 - $300) / $300] x 100% = 10%
Real GDP in 2011 = $300
Real GDP in 2012 = 110 x $1 + 220 x $1 = $330
% increase= [(Real GDP in 2012 - Real GDP in 2011) / Real GDP in 2011] x 100% = 10%
c. What is the value of the GDP deﬂator in the two years? By what percentage does the price level
change from the base year to 2012?
GDP deflator in 2011= 100
GDP deflator in 2012= 123.3
Percentage does the price level change from the base year to 2012
= [(123.3-100) / 100] x 100% = 23.3%
d. Was the increase in Nominal GDP due more to an increase in prices or in the volume of output?
Increasing in Nominal GDP due more to an increase in prices because Nominal GDP values output
using current prices.
e. What was the growth rate of average labour productivity for the whole economy between 2011
and 2012?
Productivity in 2011= $300 / (500 + 500) = 0.3
Productivity in 2012= $330 / (600 + 500) = 0.3
INCREASE 0%
2011 2012
Output (Pencils) 100 110

Output (Erasers) 200 220
Employment (Pencils) 500 600
Employment (Erasers) 500 500
Price per Pencil $1.00 $1.50
Price per Eraser $1.00 $1.10
Question 2: Write an Essay (400 words) to Identify and discuss factors that affect Exports, Saving
and Investment in both closed and open Economy.
The dynamics of exports, saving, and investment play a pivotal role in shaping the economic
prosperity of both closed and open economies. These factors are influenced by a multitude of
variables, ranging from government policies to global market conditions. This essay will identify
and discuss some of the key factors that affect exports, saving, and investment in both closed and
open economies.
Exports are a crucial component of economic growth, and their performance is influenced by
various factors:
- Exchange rates can significantly impact a country's exports. A weaker domestic currency can
make exports cheaper and more competitive in international markets, stimulating demand.
Conversely, a strong currency can hinder exports.
- Government trade policies, including tariffs, quotas, and trade agreements, have a direct impact
on exports. Favorable trade policies can boost exports by reducing trade barriers.
- The demand for a country's exports depends on global economic conditions. A robust global
economy increases demand for exports, while a downturn can lead to reduced export opportunities.
Saving is critical for economic stability and future investment. The factors affecting saving in both
closed and open economies include:
- Higher income levels typically lead to higher levels of saving. People with higher incomes have
more disposable income to save.
- The prevailing interest rates influence the incentive to save. Higher interest rates can encourage
saving by providing a greater return on savings.
- Consumer confidence in the economy plays a role in determining saving levels. In uncertain
economic times, people tend to save more as a precautionary measure.
Investment drives economic growth and development. The factors influencing investment in both
closed and open economies encompass:
- Just as interest rates affect saving, they also influence investment decisions. Lower interest rates
can reduce the cost of borrowing for businesses, spurring investment.
- Government policies, such as tax incentives and regulatory frameworks, impact investment. Pro-
business policies can stimulate investment, while excessive regulations can deter it.
- A stable economic environment fosters investor confidence. Political stability, low inflation, and
predictable economic conditions are conducive to higher investment levels.
- Access to financing and capital markets is vital for businesses' ability to invest. Availability of
credit and venture capital can determine the extent of investment in an economy.
Exports, saving, and investment are interconnected elements that drive economic growth in both
closed and open economies. While exchange rates, trade policies, income levels, interest rates, and
economic stability are among the key factors that influence these economic components, they
interact in complex ways. Governments and policymakers must carefully consider these factors and
implement strategies that promote exports, encourage saving, and facilitate investment to foster
sustainable economic development and prosperity. A balanced approach that addresses these
factors can contribute to a robust and resilient economy, whether it operates in a closed or open
system.
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ECO121 Macroeconomics

FOR TEACHER ONLY

Output (Pencils) 100 110

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