Kingdom of Saudi Arabia Ministry of Education Saudi Electronic University المملكة العربية

Kingdom of Saudi Arabia

Ministry of Education

Saudi Electronic University

المملكة العربية السعودية

وزارة التعليم

الجامعة السعودية الإلكترونية

College of Administrative and Financial Sciences

Assignment 3

ECON201 (1st Term 2021-2022)

The Assignment must be submitted only in WORD format via allocated folder.

Assignments submitted through email will not be accepted.

Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.

Students must mention question number clearly in their answer.

Late submission will NOT be accepted.

Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.

All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

Submissions without this cover page will NOT be accepted.

Assignment Purposes/Learning Outcomes:

After completion of Assignment-3 students will able to understand the

LO 1.2: Describe how to evaluate macroeconomic conditions such as unemployment, inflation, and growth.

LO 1.3: Recognize the fundamental determinant’s of a nation’s long-run economic growth.

Q1: You take $1000 that you held as currency and put it into the banking system. The

reserve ratio is equal to 10%. [1.5 Marks]

Calculate the money multiplier.

By how much will increase the total amount of deposits in the banking system?

By how much will increase the money supply?

Q2. (Labor Force, Labor Participation Rate and Unemployment Rate). [1.5 Marks]

In Year 1, country A has a labor force of 100, of whom 90 are employed. The remaining 50 people in the country are not in the labor force.

Calculate the employment ratio, the labor participation rate and unemployment rate.

Over the course of the year, 10% of the employed become unemployed, while 20% of the unemployed become employed; 5% of the employed leave the labor force, while 4% of those not in the labor force become employed. The population remains unchanged.

Fill in the following table. (Hint: It might be helpful to draw the flow diagram before answering.)

In Year 1

In Year 2

Population

150

150

Labor Force

100

Employed

Unemployed

Calculate the employment ratio, the labor participation rate and unemployment rate. (Fractions suffice.)

Q3. Assume that a bank has on its asset side reserves of 1000 and loans of 6000 and on

its liability side deposits of 7000. Assume that the required reserve ratio is 10

percent. [2 Marks]

1) How much is the bank required to hold as reserves given its deposits of 7000?

2) How much are its excess reserves?

3) By how much can the bank increase its loans?

Answer: