Economic Worksheet

Question 1

a) Classify each of the following as a movement along or a shift of the production function and provide a justification for your choice.

(i) Grace Kennedy invests $125 million in a new manufacturing plant.
(ii) A new highway linking two major towns is constructed
(iii) A new fertilizer formula improves crop yields.
(iv) An earthquake.
(v) Illegal drug traffickers start to bribe judges and corrupt the justice system.

Question 3

a) Identify which category of unemployment each of the following persons would belong to.

(i) Rahul's wife is transferred to the Santa Cruz branch of her bank, so he leaves his job as a teacher at Campion to try to get a job at St Elizabeth Technical.

(ii) A global economic slump reduces Caribbean tourist traffic.

(iii) Digicel buys out Claro Jamaica and lays off Claro's administrative staff.

(iv) The contraction of the sugar industry idles cane cutters while the demand for IT workers remains unsatisfied.

(v) As production processes become more sophisticated, people who leave school without CXC subjects are unable to find employment.

b) Carefully explain how each of the following events will affect the demand for labour, supply of labour, equilibrium wage and level of employment.

(i) Boatloads of Haitian migrants arrive.

(ii) Worldwide demand for our exports surge.

(iii) The income tax rate is increased from 25 percent to 35 percent.

(i) Improvements in education and training raise the general level of productivity.

Question 4

Carefully explain the impact on the money demand, money supply, equilibrium interest rate and the quantity of money due to each of the following:

a) The changes in bank regulations expand the availability of credit cards so people need to hold less cash.

b) During a period of rapid inflation the central bank increases the reserve requirement.

c) The economy recently experienced an increase in the number of tourist arrivals, increasing income throughout the island.

d) Oil prices on the world market increase, causing domestic prices to increase.

Question 5

a) Determine which account of the Balance-of-Payments is affected by each of the following transactions. (E.g. Current Account - Transfers)

(i) A local firm ships US$80 million of merchandise to China.

(ii) National Commercial Bank, a local company, pays US$1 million in dividends to foreign shareholders.

(iii) A German company builds a manufacturing facility in your country.

(iv) A local resident purchases a retirement condo in Florida for US$10 million.

(v) You travel to the United States for holiday and spend US$500

(vi) You invest in the South Korean stock market by buying US$500 in stock.