The Global Economy MAE203 Assignment

MAE203: The Global Economy

Trimester 3 202

Final Assessment Task End of Unit Assessment

Instructions

• This end of unit assessment task is available for 24 hours, with a suggested writing time of 2 You may choose when to complete the task within this time frame.
• You are allowed to access all resources during the assessment, except for contract cheating sites, artificial intelligence content generation sites, resources that undermine the purpose of the assessment, and help from peers or others (unless specified otherwise in the assessment instructions). It is important that you complete this task individually. Your submission will be reviewed to detect contract cheating, collusion, and/or plagiarism.
• The end of unit assessment task will be released in the CloudDeakin unit site under a dedicated End of Unit Assessment module at the date and time scheduled in the University Exam T3 2024 Exam
• This end of unit assessment task constitutes 60% of your assessment in this
• This end of unit assessment task comprises 3 You are required to answer ALL 3questions.
• Download the assessment paper and review the You are required to type all your answers into a separate single Microsoft Word document (.docx). Save your answer document on your computer using the following naming convention: [Student ID]_[Unit Code]_EOUA. For example: 216123123_UNITCODE_EOUA. Once completed, submit the answer document to the End of Unit Assessment Submission folder on the CloudDeakin unit site.
• Late submissions and/or submissions in a file format other than Microsoft Word (.docx) will not be marked.
• Remember to save your work If you encounter any technical issues with CloudDeakin, please contact the IT Service Desk online or via phone (1800 463 888; +61 5227 8888 if calling from outside Australia) and record your ticket number. This evidence is necessary for any Special Consideration application due to technical issues during the end-of-unit assessment period

This is an Open Book Take Home Written Task. You must upload your final responses as a Microsoft Word Doc and a pdf file to the CloudDeakin End of Unit Assessment Dropbox within 24 hours of the start time scheduled in the EoUA timetable.

This assessment task consists of 3 questions. You must answer all the questions. This assessment task carries a total of 60 marks. (This is converted to 60% of your total assessment in this unit).

Preparing and submitting your answers:

• Download the assessment answer sheet word document and save it on your computer using the file name: your-student-ID, unit-code; A hypothetical example: 123456789_MAE203.doc (or .docx)
• Input your answers in that document by typing your response below each question number.
• Save your work regularly as you make progress towards completing this assessment
• Insert appropriate diagrams and calculations, if necessary, in the answer document. You may legibly draw/hand-write relevant graphs or calculations on a piece of white paper, scan it and insert it in the document along with your typed response to each question. You may use a calculator to aid your work.
• For instructions on scanning and inserting images in the word document, please refer to End of Unit Assessment Preliminary Information Document that was released on the unit site prior to the EoUA period.
• Upload the completed answer sheet word document along with a pdf copy of the same in the CloudDeakin Dropbox prior to cut-off Check that you uploaded the correct file.
• Late submissions will not be
• If you encounter any technical issues with CloudDeakin, please contact the IT Service Desk online or via phone (1800 463 888; +61 5227 8888 if calling from outside Australia) and record your ticket number as evidence of technical issues during the assessment period.
• it is important that you work individually on this assessment Your submission will be reviewed for the purposes of detecting contract cheating, collusion and/or plagiarism.

The breakdown of marks in this assessment task is:

Question 1 (6+6+4+4=20 marks)

a) Consider an economy described by the per-worker production function ???? = ?????. Assume that there is population growth, but no technological Specifically, the economy has a rate of population growth of 2%, a saving rate of 15%, and a depreciation rate equal to 3%.

1. Write the steady sate condition of the Solow model with population growth but no technological Find the steady state capital per worker, output per worker, and consumption per worker.
2. If you were the government, would you implement policies aimed at achieving the

1

golden rule capital level [HINT: at the steady state above, the MPK=

2?????

]? Explain.

b) According to the United Nations Population Division, worldwide fertility rates are expected to continue to drop in the decades to come, gradually moving from a global average of about 5 children per woman toward 2.1 children per woman.

1. Assuming that there is no technological progress, show graphically the predictions of the Solow growth model for steady-state capital per worker and income per worker in response to such decline in fertility
2. How would you answer differ if there was technological progress? Specifically, letting ???? be the labor-augmenting technological progress, how would the predictions of the Solow model on steady state capital and income per worker depend on ?????

Question 2 (10+10=20 marks)

a) According to the February Survey of Consumer Expectations conducted by the Federal Reserve Bank of New York, 3-year inflation expectations rose by 0.3 percentage point and 5-year inflation expectations rose by 4 percentage point. Using the IS-LM model, show graphically and explain the short-run effects on income, interest rate, consumption, and investment, of such increase in inflation expectations, and explain what the Fed should do to stabilize income and keep it to its initial level. [HINT: expected inflation affects the real interest rate, for any nominal interest rate.]

b) In July 2024, stage-3 tax cuts of the Labor Government will commence, reducing the effective income tax rates of many Australians. Using the IS-LM model, show graphically and explain the short-run effects on income, interest rate, consumption, and investment, if the RBA does not adjust the money supply M in response (holds M constant). How would your answer differ if instead the RBA adjusts the money supply M to hold the interest rate constant?

Question 3 (20 marks)

Between January and March 2018, the US administration implemented tariffs on items such as solar panels, washing machines, steel, and aluminum imported from other countries, which accounted for nearly 5% of U.S. imports. Using the Mundell-Fleming model, predict and show in a graph the effects on income, the exchange rate, and the trade balance of the U.S. in response to such tariffs, taking into consideration that the U.S. operates under a floating exchange rate regime. How would your answer change if the U.S. operated under a fixed exchange rate?

END OF ASSESSMENT TASK