HARAMAYA UNIVERSITY
COLLEGE OF CONTINUING AND DISTANCE EDUCATION
DEPARTMENT OF ECONOMICS
ASSIGNMENT FOR THE COURSE MACROECONOMICS I (ECON 1021)
30%
JANUARY, 2014
STUDENT INFORMATION:
NAME: _______________________________________
DEPARTMENT: ______________________________
I.D. No: ______________________________________
CENTER :________________________
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Part I: Multiple Choices
Choose the best answer and write your answer on the space provided (1 pt each)
1. Recession
A. Begins at the trough of the business cycle.
B. Is an economy-wide decrease in the level of economic activity.
C. Ends at the peak of the business cycle.
D. Has not occurred in the Ethiopian Economy.
E. None
2. Which of the following is normative statement?
A. Inflation is rising.
B. Inequality in the distribution of income is a more serious problem than
unemployment.
C. The richest 10 percent of the population has had a bigger percentage
increase in incomes over the past 10 years than the poorest 10 percent.
D. The proportion of people's income paid in taxes is higher under this
government regime than under the previous one.
E. All are positive statement.
3. If an Ethiopian construction company built a road in South Sudan, this activity would
be
A. Excluded from Ethiopian GNP.
B. Fully included in Ethiopian GDP.
C. Included in Ethiopian GNP only for that portion that was attributable to
Ethiopian capital and labor.
D. Included in Ethiopian GDP but not in Ethiopian GNP.
4. Per capita real output is best defined as:
A. The market value of all final goods and services produced in
current prices
B. The market value of all final goods and services produced in
current prices divided by the population
C. The market value of all final goods and services produced in
the prices of a given year.
D. The market value of all final goods and services produced in
the prices of a given year divided by the population.
E. All
an economy in
an economy in
an economy in
an economy in
5. Unemployment resulting from imperfect information in the labor market is called
A. Disequilibrium unemployment
B. real-wage unemployment
C. frictional unemployment
D. natural unemployment
E. None
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6. Suppose the working-age population is 220 million, the labor force is 150 million, and
the unemployment rate is 10 percent. The number of unemployed people is
A. 22 million.
B. 37 million.
C. 7 million.
D. 15 million
7. An investment theory that try to relate level of investment with stock market
A. Accelerated theory of investment
B. Tobin-q theory of investment
C. Internal fund theory of investment
D. Neo classical theory of investment
E. Keynesian marginal efficiency criterion of investment
8. Currently the Ethiopia financial system is relied on fiat money system. This means that
A. The money supply includes coins but not paper currency
B. There are limits on the amount of money that can be created
C. Money has value only because of government regulation or law
D. Money is backed by gold and silver reserves
9. If there is drought in particular area, there will be decrease in agricultural product and
leads to recession phase of business cycle. This argument belongs to;
A. Monetarists theory
B. Keynesian theory
C. Real business cycle theory
D. Rational expectation theory
E. All
10. The marginal propensity to consume is
A. The proportion incremental income that goes to consumption
B. The magnitude of total consumption relative to total income
C. The percentage of income that goes to consumption
D. It is calculated as total consumption divided by total income
E. A and C
Answer kit for Part I
Ser.
No.
Answer
Ser.
No.
1
6
2
7
3
8
4
9
5
10
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Answer
Part II: Work out and Discussion Questions
Show the necessary steps for the workout questions, valid and to the point argument is
required for the discussion questions.
1. In Ethiopian economy (closed economy) agricultural sector produces wheat that can
be used for both final consumption as well as raw material by consumer and the
industrial sector, respectively. The total produce of the sector is 100 quintal and sold
it 500 Birr/quintal. The costs of production in this sector are wage payment for 10
labors; 1000 Birr each and tax to the government at lump sum bases, which is
estimated 5000 Birr. From its total produce 50% is sold to the final consumer and
the remaining proportion purchased by flour producer firms.
The industrial/flour producer sector uses its 25 quintal of its purchase as raw
material and remaining proportion is stored as inventory. The wage and tax payment
for this sector is 2000 Birr each. The raw material receives some value addition in
this sector and sold to final consumers at 1000 Birr/quintal.
Government spend its entire fiscal year income/revenue (the sum of tax from the
wheat producers and wheat flour producers together with 1000 Birr income tax
from the consumers) for the construction of school and hospitals. The expenditure
for those constructions is entirely received by the consumer as their labor
contribution. Calculate the GDP of this economy using
A. Value Added Approach (2 pts)
B. Expenditure Approach (2 pts)
C.Income Approach (2 pts)
2. Derive a saving function from Keynesian consumption function, C = 70 + 0.7Yd, and
interpret every parameter (slope and intercept) of the derived function (4 pts)
3. Explain briefly the concept of Crowding out effect (with appropriate graph) and
Paradox of thrift (4 pts)
4. National Bank of Ethiopia purchase 1,000 Birr value of financial securities from one
of the commercial banks in Ethiopia and it has set an obligation on commercial banks
to deposit 10% of their total mobilized deposit.
A. Set the assumptions for simple model of multiple deposit
creation/contraction. (1 pt)
B. Show the process of multiple deposit creation/contraction using T- account
and its appropriate explanation. (3 pts)
C. What is the total amount of money created/contracted in our economy and
its multiplier (2 pts)
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