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CCBS4010 Macroeconomics: Theory and Applications
Individual Assignment 1
2024-2025 S1
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(1) Please submit the assignment (in ONE pdf format) via sub-class soul page.
(2) The deadline for the assignment is Oct 16, 2024 (Wed), 23:59.
Late submission is subject to penalties as shown below.
Late by Marks
deducted
Less than 24 hours 20%
24 – 48 hours 50%
More than 48 hours 100%
(3) Students who are found copying homework or lending work to others for
copying will receive NO mark.
(4) Please clearly put down your class number, name and student ID on the front
page of the assignment.
(5) Answers must be handwritten in blue/black ballpoint pen on plain white
A4 size paper. [Note: Any failure to comply with the requirements here will
result in mark penalty.]
(6) Please make sure enough space is left between each sub-part of the question
and each question to facilitate marking.
(7) Round your final answers to two Decimals Places.
(8) This assignment (30 marks in total) accounts for 15% of the course assessment.
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1. (18 marks)
The following table shows the components of the Real GDP (in billion US
dollar) of the US and China in 2023.
US China
Private Consumption 18,600 10,000
Private Investments 4,800 5,500
Government purchases 4,700 1,500
Net Exports –800 500
a. Find the Real GDP of the US and China respectively in 2023.
Show your calculations. (2 marks)
b. Calculate the percentage of each expenditure component as a total of the
real GDP in the two countries respectively. Briefly explain which
expenditure component is the most important in determining the economic
performance of the two countries respectively in 2023. (3 marks)
c. Some people argue that China continues to “shift her focus to private
consumptions as her growth engine”.
Based on the results in (b), discuss this argument. Explain why this may
not true if we look at the long-term economic growth of China. (5 marks)
d. By reading the results in (a), some people believe that the economic well-
being of the US and China are comparable.
Given the results in (a) and your understanding about the recent economic
situations in the US and China, explain FOUR reasons why this belief is
not true. (8 marks)
2. (6 marks)
Suppose the production function of an economy is Y = 50K
0.4
L
0.4
,
where K is capital, and L is labour.
In this economy, there are two types of factor owners: capital owners and
labours.
a. What is the real wage rate earned by each labour? (1 mark)
b. What is the real rental rate earned by each capital owner? (1 mark)
c. Using the result in part (b), explain how population growth would affect the
real rental rate of a capital owner. (2 marks)
d. Why can’t we rely on population growth to achieve sustained economic
growth? In other words, according to the production function, how can we
maintain sustained economic growth? (2 marks)
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3. (6 marks)
According to South China Morning Post on 31 March, 2024, “Hong Kong
grocers feel pain as locals are not willing to spend in Hong Kong.”
Use the closed economy loanable fund market with well-labelled diagram to
explain the long run effects on Hong Kong’s real interest rate, saving and
investment. (6 marks)
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