EC111 Assignment 2 2012 answers

EC111 Assignment 2 2012 answers - UNIVERSITY OF ESSEX...

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UNIVERSITY OF ESSEX SPRING TERM 2012 DEPARTMENT OF ECONOMICS JONATHAN HALKET EC111 – INTRODUCTION TO ECONOMICS ASSIGNMENT 2 This assignment is to be handed in to Room 5B.209 BEFORE 12.00 NOON on MONDAY 5th March 2011 . You will receive an electronic receipt. You should NOT hand in assignments to your class teacher. Please note that the University has a coursework deadline policy. Therefore, all assignments submitted after the deadline will receive a mark of zero. See page 65 of the Undergraduate Economics Handbook for details. Please make sure that your NAME and that of your CLASS TEACHER and CLASS NUMBER are printed clearly on the front page of your assignment. This assignment is divided into two sections. Each is worth 50% of the marks. Write your answers in the spaces provided; do not include any other sheets, do not write on the back of the sheets. You should answer all questions. No marks will be awarded for those parts of answers which exceed the space limits. Please write your answers clearly and use diagrams where appropriate. CLASS TEACHER’S NAME :…………………………………………………………… (Block capitals only) CLASS NUMBER :………………………………………………………………………. .. YOUR NAME :……………………………………………………………………………. (Block capitals only) 1
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Section A (5 marks per question) State whether each statement is TRUE, FALSE or UNCERTAIN, giving a brief explanation in the space provided. Use diagrams where appropriate. Your marks will depend entirely on the quality of the explanation: e.g. even if it is correct, putting “TRUE” will get no marks unless you explain your answer . 1. If there is no unemployment, the economy is producing at its potential output. FALSE. In the labour market, a distinction exists between those in the labour force (LF) and those who have actually accepted jobs (AJ). The disparity between the two comes from the natural churning that occurs over time as people have episodes of unemployment as between jobs. These workers are going through job search and related activities. This difference between LF and AJ generates a positive natural rate of unemployment given any real wage so workers will be unemployed even if the labour market is in equilibrium and the economy is producing at its potential. Recall that equilibrium in the labour market determines aggregate supply and potential output. [Full points for noting that potential output can have unemployment or for noting that when there is no unemployment, the economy is above potential output] 2. A decrease in the rate of direct taxation lowers the Keynesian goods market multiplier (the multiplier that translates autonomous changes in consumption, investment or government spending into changes in national income). FALSE. Using aggregate demand accounting in the goods market Y = C + I +
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EC111 Assignment 2 2012 answers - UNIVERSITY OF ESSEX...

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