Question 1 (6 marks) a) Think about the Model of Aggregate Demand and Aggregate Supply. How can this model be used to make predictions about the economy of Bangladesh?
b) Use the sticky wage theory to explain in detail the upward slope of the SRAS supply curve?
Question 2 (3 marks)
a) Let’s assume the real GDP of country Z is increasing. James concludes that now the citizens of country Z can enjoy more goods and services. Why might his conclusion be wrong? Discuss in detail.
b) The GDP of country A is higher than GDP of country B. Floyd concludes that the total income of the citizens of country A must be greater than country B. Why might his conclusion be wrong?When might his conclusion be correct?
Question 3 (4 marks)
Use the Circular Flow Model to explain how the economy of Bangladesh functions.
Question 4 (5 marks)
a) There are two methods of calculating GDP: income approach and expenditure approach.
According to your opinion which method is better suited for calculating the GDP of Bangladesh? Briefly explain the reasons behind your answer.
b) When calculating the GDP using the expenditure method why do we subtract “imports”?
c) When calculating the GDP of Bangladesh using the income approach why do we add the“earnings of foreigners living in Bangladesh”?
d) When calculating the GDP of Bangladesh using the income approach why do we subtract“earnings by Bangladeshis living in foreign countries”?
Question 5 (4 marks)
How might a lockdown affect an economy? Use the Model of Aggregate Demand and Supply to explain in detail.
Question 7 (4 marks)
a) The unemployment rate in Bangladesh in 2020 was reported to be 5.30%. What does this mean?Explain briefly.
b) Is it ever possible to have zero unemployment in an economy? Why or why not? Explain in detail.
Question 8 (4 marks)
a) In 2019 the CPI of Bangladesh was 258.65 and in 2020 it was 273.26. What are all the information we can obtain from the given CPI values.
b) How can business organization use the given CPI values to adjust the wage of their employees?