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ECO 409 - Final Spring 2022 Theory

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9 views2 pages

ECO 409 - Final Spring 2022 Theory

Uploaded by

Saba
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INSTITUTE OF BUSINESS MANAGEMENT

Final Examinations – Spring 2022

Course Title: Business Economics Course Code: Eco 409


Faculty: Muhammad Sajid Salim Section: E – 12548
Day / Date: Tuesday 10 May 2022 Timings: 6:30 – 9:30
Student’s Name ______________________ Total Marks: 40
Student ID: ______________________
Note: Please attempt all questions

Section B

(Answer all questions)

1. Suppose you are a personal friend of the governor of the UK central bank, the Bank of England.
He comes over to your house for lunch and notices your sofa. The governor is so struck by the
beauty and comfort of your sofa that he says he simply must have it for his office. The governor
buys it from you for £1,000 and, since it is for his office, pays you with a cheque drawn on the
Bank of England.
a) Are there more pounds in the economy than before? Why? [2]
b) Why do you suppose that the Bank of England doesn't buy and sell sofas, cars, and so on,
instead of government bonds when it wishes to change the money supply? [1]
c) If the Bank of England doesn't want the money supply to rise when it purchases new
furniture, what might it do to offset the purchase? [1]
2. For each of the following transactions, determine the contribution to the current year's GDP of
USA. [2]
a) Colonel Hogwash purchases a Civil War-era mansion for $1,000,000. The broker's fee is
6%.
b) A homemaker enters the work force, taking a job that will pay $40,000 over the year. The
homemaker must pay $16,000 over the year for professional child care services.
c) You are informed that you have won $3,000,000 in the New Jersey State Lottery, to be
paid to you, in total, immediately.
d) The New Jersey state government pays you an additional $5000 fee to appear in a TV
commercial publicizing the state lottery.

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3. Read the source material carefully before answering question 3

Vietnam’s population and its output are increasing. Consumers, workers and firms are benefiting
from the higher output. Some Vietnamese people are receiving more generous pensions and
higher wages while some firms are earning higher profits. Vietnam’s population is ageing but the
country still has a relatively young labour force. Age can affect workers’ flexibility, mobility,
level of experience and their knowledge of the latest technology. The Vietnamese government
wants to raise the quality of its labour force by spending more on education. Vietnamese children
have recently performed better in international tests than children in richer countries.
a) Explain what happened to Vietnam’s foreign exchange rate between 2010 and 2017. [2]
b) Explain two benefits an economy may gain from having a young labour force. [4]
4. Analyse how a fall in the rate of interest may affect a country’s exchange rate. [4]
5. Explain why an economy’s income must equal its expenditure. [4]
6. How can supply-side policies help an economy to produce greater output, reduce unemployment
but reduce the price level at the same time? [4]
7. Explain how minimum wage laws can lead to an increase in unemployment and explain how
these laws affect a business. [4]
8. Define the following terms (Any eight) [4]
a) monetary policy
b) recession
c) economic profit
d) price elasticity of demand
e) cross-price elasticity of demand
f) gross domestic product (GDP)
g) fiscal policy
h) stakeholder
i) opportunity cost

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