Name: ____________________
Student ID:________________
LINCOLN UNIVERSITY
Semester 1, 2024
Test 2
Instructions:
This Test consists of SIX (6) questions.
You are required to answer ALL questions.
Marks allocated to each question are indicated.
This is an OPEN BOOK Test.
Please check that your copy is complete.
This is an individual test.
It is recommended to use the Calibri 12 point font with 1.5 spacing. Choose your alignment: Justified.
If you want to include graphs to facilitate your discussion, it is acceptable that you copy the hand-drawing graphs from your notebook to your test paper.
There is no word limit for answers to each question. You just show your best answers.
Please carefully show all your workings.
Deadline:
This is a time-restricted test. Any type of plagiarism is not permitted.
You can download the test requirements after 11 am on 31 May (Friday). You must upload your answer sheet to Learn Site before 11 am on 3 June (Monday). In your answer sheet, please do not remove the questions.
Late submission will be marked as zero.
Weight: 30% of your final marks
TOTAL MARKS: 80
Questions
If a household’s money income decreases due to external shocks such as COVID-19 pandemic and prices of goods and services do not change, what happens to the household’s real income and budget line? Show all your workings.
(5 marks)
If a household has an income of $3,000 and buys only bus rides at $75 each and magazines at $50 each, what is the household’s budget equation? Show all your workings. Please use the symbols described in the first column of the below table when you write your formulas. The final formula should reflect the relationship between Qm and Qb, that is, Qm=“your results”.
(5 marks)
What determines the supply of loanable funds, and what makes it change? Explain your answers.
(5 marks)
Use the following information to work on Problems (a) and (b).
Suppose that the New Zealand government lowers the tariff on imports of textiles from China from 100% to 50%.
Explain how the tariff on textiles will change the price that New Zealand consumers pay for textiles, the quantity of textiles imported, and the quantity of textiles produced in New Zealand. Based on this, please answer questions (a1), (a2) and (a3) below.
(15 marks)
You need to first select the most appropriate answer from the given options and write your answer in the last column of the table below. Then, you need to explain your answers.
(a1) Step 1: Selecting the most appropriate answer (1 mark)
(a1) Step 2: Explain your answers (4 marks).
(a2) Step 1: Selecting the most appropriate answer (1 mark)
(a2) Step 2: Explain your answers (4 marks).
(a3) Step 1: Selecting the most appropriate answer(1 mark)
(a3) Step 2: Explain your answers (4 marks).
Please explain how New Zealand and Chinese gains from the international trade will change (A=decrease; B=unchange; C=increase) (2 marks) and why (3 marks)?
Who in New Zealand will lose from the international trade (2 marks) and why (3 marks)?
Who in New Zealand will gain from the international trade (2 marks) and why (3 marks)?
Use the following information to work on Problems (a) and (b). Show all your workings.
With free international trade between New Zealand and Canada, New Zealand would export beef to Canada, but Canada imposes an import quota on New Zealand beef.
Explain how this quota influences the price that Canadian consumers pay for beef, the quantity of beef produced in Canada and the Canadian and New Zealand gains from trade. Based on this, please answer questions (a1), (a2) and (a3) below.
You need to first select the most appropriate answer from the given options and write your answer in the last column of the table below. Then, you need to explain your answers.
(15 marks)
(a1) Step 1: Selecting the most appropriate answer (1 mark)
(a1) Step 2: Explain your answers (4 marks).
(a2)Step 1: Selecting the most appropriate answer (1 mark)
(a2) Step 2: Explain your answers (4 marks).
(a3) Step 1: Selecting the most appropriate answer (1 mark)
(a3) Step 2: Explain your answers (4 marks).
Explain who in Canada and New Zealand will gain from the quota on beef imports (2 marks) and why (3 marks).
Explain who in Canada and New Zealand will lose from the quota on beef imports (2 marks) and why (3 marks).
Use the following information to work on Problems (a) and (b). Show all your workings.
Sara’s income is $1,000 a week. The price of popcorn decreases from $100 to $50 a bag, and the price of a smoothie is unchanged at $25.
How does the decrease in the price of popcorn affect Sara’s real income in terms of smoothies and her real income in terms of popcorn? Show all your workings.
(5 marks)
How does the decrease in the price of popcorn affect the relative price of a smoothie in terms of popcorn? What is the slope of Sara’s new budget line if it is drawn with smoothies on the X-axis? Show all your workings.
(5 marks)
