Principles of Macroeconomics (with Xtra!)

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ECMB06 – All lectures Macroeconomic Theory and Policy: A Mathematical Approach Assignment 1 Due: On or before Monday, February 4, 2008, 12:00noon Room: MW 380 (Professor Parkinson’s office) Note: Assignments submitted after 12:00noon on February 4 th WILL NOT BE accepted under ANY circumstance. Instructions: You can submit individual or group assignment. If you submit group assignment, there should be no more than FIVE students in your group and you just have to submit ONE copy. WORK WITH STUDENTS FROM THE SAME GROUP ONLY. Group members may be from any section! A title page MUST be attached with your assignment; it MUST include your name(s) and student number(s). Staple your assignment (Paper clip is not accepted). A PENALTY OF 10% OF THE TOTAL MARKS WILL BE IMPOSED IF YOU DO NOT HAVE A TITLE PAGE OR STAPLE YOUR ASSIGNEMNT. Label your graph(s); otherwise, marks will be subtracted. No credit will be given if you do not show your work. Your answer should be structured in a way such that those know little about economics will have no difficulty in understanding your argument/answer. Total marks: 100 points. Suppose we are given the following information about an economy. Year 1 10,000 big screen TVs are produced in the domestic economy 16,000 big screen TVs are imported, as at $800 each they cost 20% less than domestically produced models sell for The government being loyal to domestic firms’ only buys domestically made TVs and buys 80% of the units produced. Domestic consumers buy all remaining units 8,000,000 kilograms of paper is produced and sold at $9 for every 10 kilos 90,000 desks are imported and sold for $50 per desk The government buys 10% of the paper produced, households buy 30% and the rest is exported The government, firms, and households each buy 1/3 of the desks 10,000,000 anti-depressant tablets (pills) are produced and sold for $1 each 70% of these pills are exported to a foreign country whose residents are depressed since they currently buy 60% of the 4 million barrels of oil we produce for a price of $60 per barrel ECMB06 Assignment 1 (Spring 2008) 1
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Three quarters of the oil not exported was used to heat the homes of our nation the remainder was used by the government We imported $80 million worth of music CDs at $20 each 6 million pens are produced with the government buying 40% of them at a price of $0.50 each (due to bulk buying power) and households buy the rest at a price of $0.75 each. The government paved 1,000 kilometers of roads at a cost of $500 per KM
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ECMB06_Assignment_1_(Spring_2008) - ECMB06 All lectures...

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