2DEPARTMENT OF ECONOMICS EC111 INTRODUCTION TO ECONOMICS
Thursday 17th May 2012 9.30am – 11.30am (2 hours)
Students must answer THREE questions with at least one from each section
SECTION A 1. Explain, with the use of a labour supply and demand diagram, what happens to wages and employment when the pension age increases and there is also an increase in female labour force participation.
Using a diagram that shows the relationship between the demand for money and the supply of money, explain what happens to the price level when there is a decrease in the supply of money.
Explain how knowledge of the concepts of opportunity cost, absolute advantage and comparative advantage help us to understand Mankiw’s fifth principle of economics: trade can make everyone better off. Using a production possibilities frontier drawn for a simple example of your own choosing, illustrate and explain how trade impacts on the consumption possibilities for an individual or a country.
4. i) Using appropriate diagrams for each, explain how the long-run equilibrium of an economy might be affected in the short run by: a) an adverse shift in aggregate demand; b) an adverse shift in aggregate supply. (75%) ii) Assuming that there is NO intervention by policy makers, explain how the economy will eventually return to its long-run equilibrium in each case. (25%)
PLEASE TURN OVER
EC111 Introduction to Economics
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Discuss critically the following statement: “Per-capita Gross Domestic Product is an excellent measure of a country’s average standard of living”.
What are the main factors responsible for long-run economic growth? Would an increase in imports lead to a higher or lower level of a country’s output? Would an increase in exports lead to a higher or lower level of a country’s output? You answer needs to make reference to the national income accounting identity.
Using an appropriate diagram, analyse...
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