BCO124 Macroeconomics Assessment Answer

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Question :


This task brief covers for 45% of your final grade in Macroeconomics. This Course Assessment stretches over the last 2 units and you need to reflect on the concepts digested, Money – definitions, Monetary System, Money Growth & Inflation, Open Economy & International Trade. I have prepared 3 exercises for you to review, interpret and discuss individually for the Final Summative Assignment (15 marks each that add up to 45 marks)

Exercise #1 - Origins, evolution and future of Money (15 marks)

Do your own research and explain with your own words in a coherent post, why humans changed from barter to money (advantages and disadvantages), which forms of money were the first ones to succeed and why, what is commodity money, what were the origins in general for peso, or pound, and which are the main functions of money. Once you got there, please explain paper money, the Gold Standard and FIAT. What are cash equivalents and how do they compare with money?

To finish, explain the differences from your point of view between money (incl cash equivalents), securities, and crypto-currency. How do you picture the future of money?

Exercise #2 - Money Supply and fractional reserve banking (15 marks)

Assume that the reserve requirement is 8 percent. All other things equal, will the money supply expand more if the Federal Re serve buys $4 billion worth of bonds or if someone deposits in a bank $4 billion that they had been hiding in their cookie jar? If one creates more, how much more does it create? Support your thinking.

Exercise #3  Money Growth & Inflation (15 marks)

Suppose that this year’s money supply in Lotsofceroesland is $500 billion, nominal GDP is $10 trillion, and real GDP is $5 trillion.

  1. What is the price level? What is the velocity of money?
  2. Suppose that velocity is constant, and the economy’s output of goods and services rises by 5 percent each year. What will happen to nominal GDP and the price level next year if the Central Bank keeps the money supply constant?
  3. What money supply should the Central Bank set next year if it wants to keep the price level stable?
  4. What money supply should the Central Bank set next year if it wants inflation of 10 percent?


  • Wordcount: The total Final Assignment should be around 1050 words. About 350 per exercise.
  • Cover, Table of Contents, References and Appendix are expected but excluded of the total word count.
  • Font: Arial 12,5 pts.
  • Text alignment: Justified.
  • The in-text References and the Bibliography must be in Harvard’s citation style.

Weight: This task is a 45% of your total grade for this subject. It assesses the following learning outcomes:

  • Demonstrate an understanding of macroeconomic decision-making.
  • Understand the forces determining macroeconomic variables such as Money Supply, inflation, Open Market operations, and interest rates.
  • Demonstrate an understanding of the macroeconomic terminology and macroeconomic policy suggestions.
  • Evaluate real life situations with practical application of the acquired tools and knowledge.
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