101 Eco3-q.doc - 1 Please email [email protected] for the answer to the below question You can also email us for help on any of your

101 Eco3-q.doc - 1 Please email...

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1 Please email [email protected] for the answer to the below question. You can also email us for help on any of your assignments, testbanks etc. Economics 248 Assignment 1 (version B) This assignment has a maximum total of 100 marks and is worth 10 percent of your total grade for this course. You should complete it after completing your course work for Units 1, 2, and 3. Answer each question clearly and concisely. 1. a. Distinguish between a positive and a normative statement. (2 marks) A positive statement is fact based. It doesn’t have to be correct, but it must be able to be proved or disproved by checking it against the facts. Normative statements are opinion based and cannot be tested and therefore, cannot be proved or disproved. They are about what ought to be. b. Label each of the following news items as a positive or a normative statement. (8 marks) (i) The federal government’s budget this year is the largest in history. Positive (ii) The rural population in Alberta decreased over the past decade. Positive (iii) The price of gasoline is higher than it needs to be. Normative (iv) The national debt is at a manageable level and therefore is nothing to worry about. Normative 2. The CPI for Copa Republic was 115.9 in December 2010, 120.6 in December 2011, and 129.2 in December 2012. (10 marks) a. What do these numbers tell you about the price level in these three years? These numbers tell us that the average level of prices is rising during these 3 years indicating a rise in the cost of living. b. Calculate the inflation rates for the years ended December 2011 and December 2012. (120.6-115.9) *100 = 4.05% I.R. in 2011 (129.2-120.6) *100 = 7.13% I.R. in 2012 115.9 120.6 c. How did the inflation rate change in 2012? It increased by 3.08% from the previous year in 2011 and increased by 7.13% since 2010 d. Why might these CPI numbers be biased? They are biased because the CPI doesn’t take into account quality change, commodity substitution and outlet substitution bias.
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