Macro Solutions.doc - Macro1(ECON1010 2sem 2015...

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Macro1 (ECON1010), 2sem 2015 MACRO1 (ECON1010) Assignment 2 (Chapter 28, 26&28) Submit online by: 4PM 5 th Oct (Monday) (‘Assessment Task’ in Blackboard) Tutorial Time and Day: _____________________________________________________________________________ ____________________________________ Student Name: _____________________________________________________________________________ ____________________________________ ID: _____________________________________________________________________________ ____________________________________ Short Answer Questions: Question one a) How does your deposit change the Bank’s T-account? Show the T-account changes. Page 1 of 11 Assets Liabilities Deposit $ 2,000 Commonwealth Bank of Australia
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Macro1 (ECON1010), 2sem 2015 b) Now the Bank is told to maintain a reserve ratio Page 2 of 11 Liabilities Debtors $ 1600 Reserve $ 400
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Macro1 (ECON1010), 2sem 2015 c) Show how this changes the T-account of WestPac Bank. d) Total money supply Total amount = $2000 + $1600 + $400 + $320 + $1280 = $ 5,600 Question Two) a) Why do some economists claim that we should not worry too much about inflation at this level? Economist argue that some level of inflation is necessary to help in driving consumption in an economy, it keeps the prices up an makes business profitable hence 1% inflation should not worry policy makers as it is necessary for growth in economy. b) Other economists think that there are significant costs associated with inflation above 2- 3%. What are they? They include; Anticipated inflation Sticky price distortions Page 3 of 11 Assets Liabilities Deposit $ 1280 Westpac Reserve $ 320
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Macro1 (ECON1010), 2sem 2015 Unanticipated inflation Creates unemployment c)
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