On March 9 2015, the European Union (EU) commenced quantity expansion of money, Euro (€). The European Central Bank (ECB) will increase the quantity of money by 60 billion euro every month in the op

Question 1 – 10 marksPart AThe table lists some macroeconomic data for a country in 2014.(a) Calculate the country’s GDP in 2014, using expenditure approach. (2 marks)An economy produces only apples and oranges. The base year is 2013, and the table gives the quantities produced and the prices.(b) Calculate real GDP in 2013 and 2014 expressed in base-year prices. Then, calculate the real GDP growth rate between 2013 and 2014. (3 marks)Part BAustralian Bureau of Statistics reported the following data for 2014:Labour force participation rate: 64.5 per cent Working-age population (in thousands people): 18,450 Employment-to-population ratio: 61.5Calculate the(c) Labour force. (1 mark)(d) Employment. (1mark)(e) Unemployment rate. (1 mark)The Lucky Country reported the following CPI data:June 2012 103.7 June 2013 108.8 June 2014 110.1(f) Calculate the inflation rates for the years ended June 2013 and June 2014. Explain how the inflation rate changed in 2014. What does it indicate on the price level? (2 marks)Item Billions of dollars Wages paid to labour 710 Consumption expenditure 780 Profit, interest and rents 450 Investment 230 Net taxes Government expenditure 110 240 Exports Imports 450 430Quantities 2013 2014 Apples 76 78 Oranges 85 88 Prices 2012 2013 Apples $1.05 $1.15 Oranges $0.95 $1.03Individual Assignment T218BUS103/MEV Page 3Question 2 – 10 marksQuantity Expansion (QE) of Money in the European Union (EU)On March 9 2015, the European Union (EU) commenced quantity expansion of money, Euro (€). The European Central Bank (ECB) will increase the quantity of money by 60 billion euro every month in the open market in an attempt to support the economy of EU countries. The large increase in the quantity of money is expected to have significant impacts on a range of economic sectors in the EU and global financial markets.(a) Analyse how the quantity expansion of euro money is likely to affect money supply, interest rate, investment and consumption, and economic growth in the EU. Draw a relevant graph for your analysis. (3 marks)(b) Discuss how the quantity expansion of euro money would change the value of euro, exchange rate (depreciation or appreciation) against other currencies, and exports and imports in the EU. How would this contribute to EU’s current account balance and would this improve the competitiveness of the EU economy in the global market? (3 marks)Bernanke’s Asian Savings Glut Theory BlastedA former U.S. Federal Reserve chairman Ben Bernanke said that high saving rates in Asia were to blame for the extraordinarily low bond rates during the first half of the 1990s, as well as U.S. soaring house prices and current account deficit. Claudio Borio, research director at the Bank for International Settlements, said Bernanke was wrong and excessive lending by financial institutions caused low interest rates.(c) Draw a graph and explain how the high savings in Asia could have affected the global loanable funds market, the world real interest rate and investment in other countries. (3 marks)(d) Discuss how excessive lending by financial institutions in the United States might have caused soaring house prices in the United States. (1 mark)Individual Assignment T218BUS103/MEV Page 4Question 3 – 10 marksPart AExplain your answers to following questions. (a) In 2014, the exchange rate was over 90 US cents per Australian dollar. With new information today, traders expect the exchange rate to fall to 75 US cents per Australian dollar in 2015. Explain how the revised expected future exchange rate will influence the demand for Australian dollars and the supply of Australian dollars in the foreign exchange market. Why? (1 mark)(b) In October 2012, the exchange rate was 103 US cents per 100 Japanese yen. As a result of Abenomics since late 2012, the exchange rate fell to 82 US cents per 100 Japanese yen by March 2015. Draw a graph and explain what would have happened to the quantity of yen and the Japanese exchange rate? Would people plan to buy or sell Japanese yen in the foreign exchange market? (2 marks)In March 2015, Australian dollar is trading at US$0.77 per Australian dollar and the interest rate in Australia is currently 2.25 per cent a year. It is forecast that the US will increase its interest rate some time later this year. (c) If the interest rate in the US increases to 3 per cent a year, how is it likely to affect the flow of funds between Australia and the United States and the exchange rate of US dollar against Australian dollar (depreciation or appreciation)? What is likely to happen to the current account balance of the United States? (3 marks)Part BThe table gives some information about the US international transactions in 2014.(d) Explain and calculate the current account balance. (1 mark)(e) Explain and calculate the capital account balance. (1 mark)(f) Did the US official reserves increase or decrease? Explain (1 mark)(g) Was the US a net borrower or a net lender in this year? Explain your answer. (1 mark)