1. England needs to use 100 hours of work to produce one unit of cloth, while it needs to use 120 hours for work to produce one unit of wine. Without being involved in the international trade, England has been producing one million units of cloth and one million units of wine, with the total endowment of 220 million hours of work. Now, the English government decides to open her economy to the global market where the relative price of cloth against wine is 2/3. Assume that labor forces can move freely between two industries but cannot cross the border. Then, which of the following options will be taken by England? (3 points) ① Specialize in the production of cloth and then export part of cloth being produced in exchange for the import of wine. ② Specialize in the production of wine and then export part of wine being produced in exchange for the import of cloth ③ Remain in Autarky 2. This year, korean industries as a whole produce 90 trillion dollars worth of goods, of which 50 trillion dollars of goods are purchased by end users(domestic and foreign), 30 trillion dollars of goods are used as inputs to the domestic production of other industries and 10 trillion dollars of goods remain in inventory. Meanwhile, 20 trillion dollars of goods are exported and 10 trillion dollars of goods are imported, 5 trillion dollars of which being intermediate goods. Determine the size of Korean GDP in this year. (3 points) 3. This August, a big bridge connecting two regions of a city was collapsed due to an earthquake. Fortunately, no other damages have yet been reported. Rebuilding the bridge is estimated to cost around two million dollars and expected to start sometime in the next year. Determine the impact of this accident on this year’s GDP of the city. (2 points) 4. Consider a community consisting of 1,000 people. 200 persons among them are under 15 years of age, while 10 persons are above 65 years of age. This month, the unemployment rate is 4%, while the employment rate is 60%. Determine the size of people not in the labor force. (3 points) 5. Consider the two economies, Korea and USA, in which only “Big Mac” is produced and Consumed. Suppose the price of one ‘Big Mac’ is 3,000 KW in Korea and 2.5$ in the USA. (4 points): 5-1. Determine the nominal exchange rate between the Korean Won and the US dollar that satisfies the Purchasing Power Parity between the two economies. 5-2. Assume the nominal exchange rate remain at the level obtained in i), but the Korean ‘Big Mac’ price is increased by 10 per cent, while the US ‘Big Mac’ being increased by 5 per cent. Then, determine whether or not the real exchange rate is appreciated, compared to the previous one, in which the PPP holds. 6. Examine how the balance sheet of the whole banking system is responding to the change in the minimum reserve requirement from 8 per cent to 10 per cent. Assume that banks keep their reserves at the levels just enough to meet the requirement and that the central bank do not change its open market operation. Based on these informations, fill out the blanks in the balance sheet of the banking system shown below. (5 points) Asset Liability Asset Liability reserves 8 deposits 100 reserves ① deposits MSB 4 capital 4 MSB 4 capital Loans 92 Loans ③ Leverage Ratio ④ Leverage Ratio * MSB: Monetary stability Bonds, issued by the central bank to control the amount of bank reserves ② 4 ⑤