You are required to upload the file in .doc or .docx format only; not as .pdf If assignments are late then marks will be deducted at 1 mark per day (as per the course guide). Of course, if you have encountered some trouble and have been unable to meet the deadline then please apply for Special Consideration. Information on extension requests are provided here: Extensions of time for submission of assessable work (Links to an external site.) Answers and diagrams are to be in entered into the word document provided. Details: The assignment consists of problems based on a scenario analysis. Your answers must be provided in the word document attached; under each of the corresponding sections in the word document. Where mathematical calculations are required you must state the equation used as well as each step in your calculations. Marks are allocated to this process – please see the rubric. Where diagrams are required, they must be fully labelled – all axis, lines, intercepts, equilibrium positions, etc…. For required diagrams you can either draw directly in the word document using ‘shapes’ and ‘text boxes’ for labelling (please remember to ‘group’ all your diagram items as they are likely to move on in your document – especially when you upload the word file and you will lose marks if we cannot ‘see’ it properly) or you can draw the diagram free-hand on paper, take a photo and paste into the word document. Do not copy and paste diagrams out of textbooks, web pages, provided lecture slides……. This must represent your own work. Assignment Document: Assignment 2.docx PROBLEM Consider an economy with the following data: Consumption expenditure = $262,619.0 million Planned investment = $86,227.0 million Government expenditure = $113,601.0 million Export expenditure = $99,804.0 million Import expenditure = $97,424.0 million Autonomous taxes = $56,700.0 million Income tax rate = 28% Marginal propensity to save = 0.4 Marginal propensity to import = 0.1 Section A Part (1) Calculate the level of autonomous consumption when the level of income equals $450,179 million (solve to one decimal point). Part (2) Calculate the level of total savings when the level of income equals $450,179 million (solve to one decimal point). Part (3) Calculate the level of actual investment when income is equal to $450,179 million and the unintended inventory investment (solve to one decimal point). Part (4) Calculate autonomous imports when income is equal to $450,179 million (solve to one decimal point). Part (5) Calculate autonomous net exports (solve to one decimal point). Part (6) Calculate autonomous planned expenditure (solve to one decimal point). Part (7) Is this economy in equilibrium when income equals $450,179 million? If not, what is the equilibrium level of income for this economy? (solve to one decimal point). Part (8) Calculate the marginal leakage rate (solve to two decimal points). In your own words, briefly explain what the marginal leakage rate symbolises for the economy (60-word limit). Part (9) Calculate the expenditure and tax multipliers for the economy (solve to two decimal points). Section B Assume that your economy is now operating at the equilibrium level in the short-run as calculated in part (7). Part (10) Illustrate the GDP gap using the AD-AS Model and the AE Model, if the natural level of income is estimated as $490,000 million. Part (11) If the government wants to close the existing GDP gap (use your calculated equilibrium value for ‘actual’), calculate the change in spending (specify whether an increase or decrease) that would have to be undertaken. (solve to one decimal point) Part (12) Briefly discuss the consequences for the economy of the above policy action if the “crowding-out” effect is present in this economy. How will the multiplier process be affected? (100 word limit) Part (13) Assume the central bank decides to move and close the GDP gap instead of using fiscal policy. In what direction will interest rates have to move to close the GDP gap and what type of open market operation will the central bank undertake? Part (14) Using the exchange rate market model, illustrate and explain how the monetary policy action identified in part (13) may affect the exchange rate. Identify the new equilibrium on the diagram as point B. (100-word limit) Part (15) Using the IS-LM model, illustrate and explain how the economy and the unemployment rate may be impacted as a result of the change in the exchange rate in part (14). Identify the new equilibrium on the diagram as point B. (100-word limit) Marking Criteria Grades will be awarded on the following basis: Fail (NN): The submitted work does not meet the criteria set. Pass (PA) 50-59%: The submitted work meets the criteria provided set for the tasks and an awareness of relevant substantive issues. This includes clear comprehension of substantive issues within the course, correct application of modelling and basic computation skills. Credit (CR) 60-69%: In addition to satisfying the conditions for a pass, the submitted work shows evidence of the ability to engage in detailed quantitative and qualitative application, sensitivity to and understanding of the substantive area and its significance, the ability to comprehend relevant theoretical ideas, and a thorough appreciation of potential outcomes. Distinction (DI) 70-79%: In addition to satisfying the conditions for a credit, the submitted work shows perceptive analysis of relevant material, the ability to engage in complex qualitative and quantitative analysis, and apply extensive and relevant theoretical analysis. The submitted work presents convincing and logically constructed arguments that are cogent and coherent. High Distinction (HD) 80%: In addition to satisfying the conditions for a distinction, the submitted work shows evidence of high order critical analysis and insightful use of wide and relevant theoretical and mathematical understanding as well as thorough attention to presentationof answers. The submitted work demonstrates the capacity to independently articulate consequences and potential outcomes. Assessment Declaration: This is an individual assignment. That means it must be your own work and you can’t copy or get help from anyone. However, it is fine to discuss the issues, ideas and how you may approach the questions with fellow students. By submitting this assessment you are declaring that you have read, understood and agree to the content and expectations of the Assessment declaration (Links to an external site.)Links to an external site. (Links to an external site.). Rubric Assignment 2 2019: Scenario Analysis and Modelling and Modelling Assignment 2 2019: Scenario Analysis and Modelling and Modelling Criteria Ratings Pts This criterion is linked to a learning outcomePart (1-1) Autonomous Consumption: Equation stated 0.1 Pts Equation stated correctly 0.0 Pts Equation not stated correctly or not stated 0.1 pts This criterion is linked to a learning outcomePart (1-2) Autonomous Consumption: Working out provided 0.1 Pts Working out provided 0.0 Pts Working out not provided 0.1 pts This criterion is linked to a learning outcomePart (1-3) Autonomous Consumption: Value calculated 0.3 Pts Correct value calculated 0.0 Pts Value not correct or not calculated 0.3 pts This criterion is linked to a learning outcomePart (2-1) Total Savings: Equation stated 0.1 Pts Equation stated correctly 0.0 Pts Equation not stated correctly or not stated 0.1 pts This criterion is linked to a learning outcomePart (2-2) Total Savings: Working out provided 0.1 Pts Working out provided 0.0 Pts Working out not provided 0.1 pts This criterion is linked to a learning outcomePart (2-3) Total Savings: Value calculated 0.3 Pts Correct value calculated 0.0 Pts Value not correct or not calculated 0.3 pts This criterion is linked to a learning outcomePart (3-1) Investment: Equations stated 0.2 Pts Both equations stated correctly 0.1 Pts One equation stated correctly 0.0 Pts Equations not stated correctly or not stated 0.2 pts This criterion is linked to a learning outcomePart (3-2) Investment: Working out provided 0
.2 Pts Working out provided for both parts 0.1 Pts Working out provided for one part 0.0 Pts Working out not provided 0.2 pts This criterion is linked to a learning outcomePart (3-3) Investment: Values calculated 0.6 Pts Correct value for both variables calculated 0.3 Pts Correct value for one variable calculated 0.0 Pts Values not correct or not calculated 0.6 pts This criterion is linked to a learning outcomePart (4-1) Autonomous Imports: Equation stated 0.1 Pts Equation stated correctly 0.0 Pts Equation not stated correctly or not stated 0.1 pts This criterion is linked to a learning outcomePart (4-2) Autonomous Imports: Working out provided 0.1 Pts Working out provided 0.0 Pts Working out not provided 0.1 pts This criterion is linked to a learning outcomePart (4-3) Autonomous Imports: Value calculated 0.3 Pts Correct value calculated 0.0 Pts Value not correct or not calculated 0.3 pts This criterion is linked to a learning outcomePart (5-1) Autonomous Net Exports: Equation stated 0.1 Pts Equation correctly stated 0.0 Pts Equation not stated correctly or not stated 0.1 pts This criterion is linked to a learning outcomePart (5-2) Autonomous Net Exports: Working out provided 0.1 Pts Working out provided 0.0 Pts Working out not provided 0.1 pts This criterion is linked to a learning outcomePart (5-3) Autonomous Net Exports: Value calculated 0.3 Pts Correct value calculated 0.0 Pts Value not correct or not calculated 0.3 pts This criterion is linked to a learning outcomePart (6-1) Autonomous Planned Expenditures: Equation stated 0.1 Pts Equation correctly stated 0.0 Pts Equation not stated correctly or not stated 0.1 pts This criterion is linked to a learning outcomePart (6-2) Autonomous Planned Expenditures: Working out provided 0.1 Pts Working out provided 0.0 Pts Working out not provided 0.1 pts This criterion is linked to a learning outcomePart (6-3) Autonomous Planned Expenditures: Value calculated 0.3 Pts Correct value calculated 0.0 Pts Value not correct or not calculated 0.3 pts This criterion is linked to a learning outcomePart (7-1) Equilibrium: Equation stated 0.1 Pts Equation stated correctly 0.0 Pts Equation not stated correctly or not stated 0.1 pts This criterion is linked to a learning outcomePart (7-2) Equilibrium: Working out provided 0.1 Pts Working out provided 0.0 Pts Working out not provided 0.1 pts This criterion is linked to a learning outcomePart (7-3) Equilibrium: Value calculated 0.3 Pts Correct value calculated 0.0 Pts Value not correct or not calculated 0.3 pts This criterion is linked to a learning outcomePart (8-1) Marginal Leakage Rate: Equation stated correctly 0.1 Pts Equation correctly stated 0.0 Pts Equation not stated correctly or not stated 0.1 pts This criterion is linked to a learning outcomePart (8-2) Marginal Leakage Rate: Working out provided 0.1 Pts Working out provided 0.0 Pts Working out not provided 0.1 pts This criterion is linked to a learning outcomePart (8-3) Marginal Leakage Rate: Value calculated 0.3 Pts Correct value calculated 0.0 Pts Value not correct or not calculated 0.3 pts This criterion is linked to a learning outcomePart (8-4): Marginal Leakage Rate: MLR explained 0.8 Pts MLR well explained 0.4 Pts MLR reasonably explained 0.0 Pts MLR not explained or not explained in own words 0.8 pts This criterion is linked to a learning outcomePart (8-5): Marginal Leakage Rate: Word limit 0.2 Pts Within word limit 0.0 Pts Outside word limit 0.2 pts This criterion is linked to a learning outcomePart (9-1) Expenditure & Tax Multipliers: Equations stated correctly 0.2 Pts Both equations correctly stated 0.1 Pts One equation correctly stated 0.0 Pts Equations not stated correctly or not stated 0.2 pts This criterion is linked to a learning outcomePart (9-2) Expenditure & Tax Multipliers: Working out provided 0.2 Pts Working out provided for both 0.1 Pts Working out provided for one 0.0 Pts Working out not provided 0.2 pts This criterion is linked to a learning outcomePart (9-3) Expenditure & Tax Multipliers: Values calculated 0.3 Pts Correct value for both variables calculated 0.0 Pts Correct value for one variable calculated 0.0 Pts No marks 0.3 pts This criterion is linked to a learning outcomePart (10-1) GDP Gap: AD-AS Model 0.2 Pts Both axis correctly identified/labelled 0.1 Pts One axis correctly identified/labelled 0.0 Pts Neither axis correctly identified/labelled or no diagram provided 0.2 pts This criterion is linked to a learning outcomePart (10-2) GDP Gap: AD-AS Model 0.3 Pts All three slopes correctly drawn and identified 0.2 Pts Two slopes correctly drawn and identified 0.1 Pts One slope correctly drawn and identified 0.0 Pts All slopes not correct, or not identified or diagram not provided 0.3 pts This criterion is linked to a learning outcomePart (10-3) GDP Gap: AD-AS Model 0.5 Pts GDP gap correctly identified 0.0 Pts GDP gap not correctly identified or diagram not provided 0.5 pts This criterion is linked to a learning outcomePart (10-4) GDP Gap: AE Model 0.2 Pts Both axis correctly identified/labelled 0.1 Pts One axis correctly identified/labelled 0.0 Pts Neither axis correctly identified/labelled or no diagram provided 0.2 pts This criterion is linked to a learning outcomePart (10-5) GDP Gap: AE Model 0.3 Pts All three slopes correctly drawn and identified 0.2 Pts Two slopes correctly drawn and identified 0.1 Pts One slope correctly drawn and identified 0.0 Pts All slopes not correct, or not identified or diagram not provided 0.3 pts This criterion is linked to a learning outcomePart (10-6) GDP Gap: AE Model 0.5 Pts GDP gap correctly identified 0.0 Pts GDP gap not correctly identified or diagram not provided 0.5 pts This criterion is linked to a learning outcomePart (11-1) Change in Fiscal Policy: Equation stated correctly 0.2 Pts Equation stated correctly 0.0 Pts Equation not stated correctly or not stated 0.2 pts This criterion is linked to a learning outcomePart (11-2) Change in Fiscal Policy: Working out provided 0.1 Pts Working out provided 0.0 Pts Working out not provided 0.1 pts This criterion is linked to a learning outcomePart (11-3) Change in Fiscal Policy: Correct value calculated 0.35 Pts Correct value calculated 0.0 Pts Value not correct or not calculated 0.35 pts This criterion is linked to a learning outcomePart (11-4) Change in Fiscal Policy: Direction of spending 0.35 Pts Direction of spending correctly stated 0.0 Pts Direction of spending not correctly stated or not provided 0.35 pts This criterion is linked to a learning outcomePart (12-1) Crowding-out effect 1.0 Pts Crowding-out effect correctly articulated and well expressed 0.5 Pts Reasonable explanation of the crowding-out effect 0.25 Pts Crowding-effect poorly articulated and expressed 0.0 Pts Crowding-out effect not articulated 1.0 pts This criterion is linked to a learning outcomePart (12-2) Crowding-out effect 1.0 Pts Consequences of the crowding-out effect correctly articulated and well expressed for the affected sector(s) 0.5 Pts Reasonable explanation of the consequences of the crowding-out effect for the affected sector(s) 0.25 Pts Consequences of the crowding-effect poorly articulated and expressed/sector impact not clearly identified 0.0 Pts Consequences not correctly identified or nor identified 1.0 pts This criterion is linked to a learning outcomePart (12-3) Crowding-out effect 0.8 Pts Impact for the multiplier process correctly identified 0.0 Pts Impact for the multiplier process not correct or answer not provided 0.8 pts This criterion is linked to a learning outcomePart (12-4) Crowding-out effect 0.2 Pts Within word limit 0.0 Pts Outside word limit 0.2 pts This criterion is linked to a learning outcomePart (13-1) Monetary Policy: Interest rate change 0.5 Pts Correct direction of interest rate change 0.0 Pts Incorrect direction of interest rate change or answer not provided 0.5 pts This criterion is linked to a learning outcomePart (13-2) Monetary Policy: Open market operation 0.5 Pts Correct open market operation identified 0.0 Pts Incorrect open market operation identified or answer not provided 0.5 pts This criterion is linked to a learning outcomePart (14-1) Exchange Rate
Model: Exchange rate diagram 0.5 Pts Both axis correctly identified/labelled 0.25 Pts One axis correctly identified/labelled 0.0 Pts Neither axis correctly identified/labelled or diagram not provided 0.5 pts This criterion is linked to a learning outcomePart (14-2) Exchange Rate Model: Exchange rate diagram 0.5 Pts All slopes correctly drawn and identified 0.25 Pts One slope correctly drawn and identified 0.0 Pts Neither slope correctly identified/labelled or diagram not provided 0.5 pts This criterion is linked to a learning outcomePart (14-3) Exchange Rate Model: Exchange rate diagram 0.5 Pts Correct slope shift(s) identified 0.25 Pts Some/one correct slope shift(s) identified 0.0 Pts Incorrect or no correct slope shifts identified or diagram not provided 0.5 pts This criterion is linked to a learning outcomePart (14-4) Exchange Rate Model: Exchange rate diagram 0.5 Pts Slope(s) shifted in the correct direction 0.25 Pts Some/one correct slope shifted in the correct direction 0.0 Pts No correct slope shifts identified or diagram not provided 0.5 pts This criterion is linked to a learning outcomePart (14-5) Exchange Rate Model: Exchange rate market diagram 0.2 Pts New equilibrium correctly identified as marked as point B on the diagram 0.0 Pts New equilibrium not correctly identified or nor clearly marked as point B or no diagram provided 0.2 pts This criterion is linked to a learning outcomePart (14-6) Exchange Rate Model: Exchange rate market explanation 0.5 Pts Correct effect on the exchange rate identified 0.0 Pts Incorrect effect on exchange rate or no effect on the exchange rate identified 0.5 pts This criterion is linked to a learning outcomePart (14-7) Exchange Rate Model: Exchange rate market explanation 0.5 Pts Correct and well expressed explanation of how the monetary policy action identified in part 13 affects the slope(s) and thus the exchange rate 0.25 Pts Some explanation of how the monetary policy action identified in part 13 affects the slope(s) and thus the exchange rate 0.0 Pts Incorrect explanation (or no explanation) of how the monetary policy action identified in part 13 affects the slope(s) and thus the exchange rate OR explanation not linked to the monetary policy action identified in part 13 0.5 pts This criterion is linked to a learning outcomePart (14-8) Exchange Rate Model: Exchange rate market explanation 0.2 Pts Within word limit 0.0 Pts Outside word limit 0.2 pts This criterion is linked to a learning outcomePart (15-1) IS-LM Model: Diagram 0.5 Pts Both axis correctly identified/labelled 0.25 Pts One axis correctly identified/labelled 0.0 Pts Neither axis correctly identified/labelled or diagram not provided 0.5 pts This criterion is linked to a learning outcomePart (15-2) IS-LM Model: Diagram 0.5 Pts All slopes correctly drawn and identified 0.25 Pts One slope correctly drawn and identified 0.0 Pts Neither slope correctly identified/labelled or diagram not provided 0.5 pts This criterion is linked to a learning outcomePart (15-3) IS-LM Model: Diagram 0.5 Pts Correct slope shift(s) identified 0.0 Pts Incorrect or no correct slope shifts identified or diagram not provided 0.5 pts This criterion is linked to a learning outcomePart (15-4) IS-LM Model: Diagram 0.5 Pts Slope(s) shifted in the correct direction 0.0 Pts No correct slope shifts identified or diagram not provided 0.5 pts This criterion is linked to a learning outcomePart (15-5) IS-LM Model: Diagram 0.2 Pts New equilibrium correctly identified as marked as point B on the diagram 0.0 Pts New equilibrium not correctly identified or nor clearly marked as point B or no diagram provided 0.2 pts This criterion is linked to a learning outcomePart (15-6) IS-LM Model: Explanation 0.5 Pts Correct effect on the economy and unemployment rate identified 0.25 Pts Correct effect on the economy or unemployment rate identified 0.0 Pts Incorrect effect on the economy and the unemployment rate or no effects identified 0.5 pts This criterion is linked to a learning outcomePart (15-7) IS-LM Model: Explanation 0.5 Pts Correct and well expressed explanation of how the change in the exchange rate identified in part 14 affects the slope(s) and thus economic activity and the unemployment rate 0.25 Pts Some explanation of how the change in the exchange rate identified in part 14 affects the slope(s) and thus economic activity and the unemployment rate 0.0 Pts Incorrect explanation (or no explanation) of how the exchange rate change identified in part 14 affects the slope(s) and thus economic activity and the unemployment rate OR explanation not linked to the change in the exchange rate identified in part 14 0.5 pts This criterion is linked to a learning outcomePart (15-8) IS-LM Model: Explanation 0.2 Pts Within word limit 0.0 Pts Outside word limit 0.2 pts Total points: 20.0
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