ECON10003
Assignment #1
Introductory Macroeconomics
Due Wednesday April 6
Instructions. You can but do not have to do this assignment in a group. If you work in a group,
it can have at most three people. The assignment is due by 4pm on Wednesday April 6.
The submission process will have two steps:
(i) Group formation : Students wanting to submit as a group will first need to form their assignment
group through the Canvas LMS site (under the People tab), further details to be provided in an
LMS announcement around 21 March. Students completing the assignment alone do not need to
form a group. Assignment groups must be formed no later than 10am on Monday April 4. This
is a strict deadline and cannot be extended for any student. Students can form an assignment
group with any other students (up to a group size of three), they do not have to be from the
same tutorial group.
(ii) Submission : Assignments can only be submitted after group formation has closed, i.e., from
10am, April 4. Assignments are submitted through the Assignments section of the Canvas LMS
site, details to be provided in an LMS announcement beforehand.
Late assignments. Late assignments will not be accepted. Please apply for Special Consideration
if for some documented reason you cannot submit by the due deadline.
Marking criteria. The tutors will mark the assignment according to the following criteria:
• Ability to use material discussed in lectures, tutorials, and other sources to answer the assign-
ment questions in a logical and coherent fashion (90 per cent weight).
• Overall presentation of the assignment. This includes spelling, grammar, correct construction
of diagrams, etc. (10 per cent weight).
• Please note that the University and the teaching staff take academic integrity seriously. Please
be aware that plagiarism and collusion are unacceptable. Further details can be found in the
subject guide.
Intro Macro: Assignment #1 2
Questions.
1. GDP, Interest Rates
The following table contains some data from the economy of country A that was sourced from
the central bank of country A.
Table 1: Annual Growth Rates of Selected Variables
Variable 1970-1989 1990-2022
nominal GDP 5.6 6.7
real GDP 3.1 2.4
(a) Consider the data contained in the table, and the statement in italics below.
Nominal GDP growth has increased in recent decades (from-1990) when compared to growth
in earlier decades (pre-1990). This indicates that growth in the nation’s income has in-
creased in recent decades. This is beneficial because growth in the nation’s income improves
people’s welfare/happiness.
Do you agree or disagree with this statement? Explain your reasoning. (3 marks)
(b) Suppose that the nominal interest rate that the bank paid was 3% per year in the earlier
period (pre-1990) and 4% in the recent period (from-1990). Do you think that the recent
period was a better time to save with the bank than the earlier period? Explain. (3 marks)
Intro Macro: Assignment #1 3
2. Real Estate Market, Aggregate Demand (3 marks).
Between 2020 and 2022, property prices across Australia have increased by 30% on average.
This has affected the wealth of Australian households and firms. Approximately 70 percent of
Australian households own or are in the process of purchasing a home. Moreover, many large
firms own properties, which are often used to borrow funds for investment. As the value of
properties has increased, this has had an impact on the wealth of some households and the
amount that firms can borrow. As household wealth and the amount that firms can borrow
have increased, household consumption expenditure and firm investment have increased.
Use a Keynesian model of the macroeconomy to describe how this increase in consumption and
investment would have affected the output in the Australian economy. Be specific and describe
what components of expenditure are affected and why.