Faculty of Commerce
Department of Business Administration
COURSE
TITLE & CODE
BBA 112B Economics II
SCORE/GRADE
MARKER NAME
TERM
INITIAL
2/2015-16
STUDENT
NAME
STUDENT
NO.
DEPARTMENT
DATE
25 Feb 2016
PAGE
of
ASSIGNMENT
TITLE.
Assignment 2
NO.
1.
MARKS
A small nation of ten people idolizes the TV show Asian Idol. All they
produce and consume are karaoke machines and CDs, in the following
amounts:
Karaoke Machines
2.
CDs
Quantity
Price
Quantity
Price
2014
10
$40
30
$10
2015
12
$60
50
$12
a.
Using a method similar to the consumer price index, compute the
percentage change in the overall price level. Use 2014 as the base year,
and fix the basket at 1 karaoke machine and 3 CDs.
b.
Using a method similar to the GDP deflator, compute the percentage
change of the overall price level. Also use 2014 as the base year.
c.
Is the inflation rate in 2015 the same using the two methods? Explain
why or why not.
Societies choose what share of their resources to devote to consumption and
what share to devote to investment. Some of these decisions involve private
spending; others involve government spending.
a.
Describe some forms of private spending that represent consumption
and some forms that represent investment. The national income
accounts include tuition as a part of consumer spending. In your opinion,
are the resources you devote to your education a form of consumption
or a form of investment?
b.
Describe some forms of government spending that represent
consumption ad some forms that represent investment. In your opinion,
should we view government spending on health programs as a form of
consumption or investment? Would you distinguish between health
programs as a form of consumption or investment? Would you
distinguish between health programs for the young and health for the
elderly?
STUDENT
NAME
3.
STUDENT
NO.
In a closed economy, suppose the government has a financial surplus of $2
billion more next year than this year.
a.
Use a supply-and-demand diagram to analyze this policy. Does the
interest rate rise or fall?
b.
What happens to investment? To private saving? To public saving? To
national saving? Compare the size of the changes to the $2 billion of
extra government surplus.
c.
How does the elasticity of supply of loanable funds affect the size of
these changes?
d.
How does the elasticity of demand for loanable funds affect the size of
these changes?
Deadline of submission:
16 March, 2016
Notes on submitting assignments:
1. Assignments have to be written in this standard form;
2. Written parts have to be typed in English;
3. Graphs and algebrae may be submitted in hand-writing but these are also
be included in the standard format;
4. Please submit hardcopies.
STUDENT
NAME
STUDENT
NO.