Economic homework

easy one. in 24hours.

this is the link.

i just found that there are 2 more questions. u can higher the price to 17

http://www.witiger.com/internationalbusiness/subsidies.htm

2

Economics 202

M

acroeconomics

Assignment 1

1. The production Possibilities Frontier.

Developing dynamic comparative advantage doesn’t always work. A notable case was in Scotland were there was an attempt to develop a region of specialisation in high tech electronics manufacturing – it was referred to as “Silicon Glen”[footnoteRef:1]. [1: This was to be Scotland’s answer to Silicon Valley in the USA. “Glen” is the Scots word for “Valley”.]

I

n

200

3 it contributed one-seventh of Scotland’s gross domestic product, directly employed 45,000 workers and accounted for more than half the country’s exports. At its peak it produced approximately 30% of Europe’s P

C

s,

8

0% of its

workstations

, 65% of its

ATMs

and a significant percentage of its

integrated circuits

.

Most of the big companies (like Motorola) that moved in to take advantage of government support and left when it was cheaper to produce abroad. By 200

9

most of the jobs disappeared in this sector. [footnoteRef:2] [2: There has been diversification into software development etc.]

a) Sketch a PPF for Scotland’s economy showing the situation before and after the collapse of Silicon Glen. Explain your PPF. [3]

b) Explain (in terms of opportunity costs and the gains from trade) why our economic model of the PPF would say that this is a good thing. [3]

c) Use the link on Moodle “When trade isn’t free”. Choose one of the issues that is covered and explain the problem in terms of our basic model (opportunity costs, comparative advantage etc). Why were the subsidies used and do you think they were justified? [3]

2. GDP

a) Use the following table to find the real GDP in

20

12

and

2004

[3]

15

12

11

15

Item	Quantity ( 000s) 2004	Quantity (000s) 2012	Price ($) 2004	Price ($) 2012
C			15	200	250
I	9	8		12		11
M	13	112	110
X	125	132

b) What is the growth rate? [1]

c) Look at the Big Mac Index (

http://www.economist.com/content/big-mac-index

) for any country listed. Is the Big Mac overvalued or undervalued, and what does this suggest for that country’s GDP? Explain how we deal with the problem of price differences between countries. [4]

2. Economic Growth

a) Find recent values of per capita GDP for two countries of your choice. Explain 2 reasons why these values might be different. [3]

c) Show, using graphs, how we find potential GDP and explain what it means. [4]

d) Explain a growth theory that you think best describes economic growth. Say why you think that this is the best theory. [4]