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17-S-FMU-无代写
时间：2022-12-18
Principles of Macroeconomics
Final Makeup
Name:
Recitation # (6 pts):
Exam Version: 17-S-FMU
Time Limit: 120 minutes.
Guidelines: READ THEM!!
• Exams written in pencil will not be regraded. You must write in ink if you might want a regrade in the future.
Illegible answers will receive no credit.
• You must stay seated for the last 15 minutes of the exam.
• Each page may have its own directions. Follow directions carefully.
• For full credit, answers must be clearly justified. Graphs must be completely LABELED and math work shown. Do
not write too much! One sentence per point is a good estimate (but is NOT a rule); i.e. do not complain if you
write one sentence for a one point question and do not get full marks.
• There are no partial marks given for multiple choice.
The following WILL BE CONSIDERED CHEATING!
• Having any calculator out. NO CALCULATORS ALLOWED!!
• Having your cell phone out
• Having any notes out
• Collaborating with other students
This exam is 19 pages (not including this front page), numbered 1-19. Good luck!
Exam Record
Part1: / 60 points
Part2: / 40 points
Incorrect Section #: / -6 points
Total: / 100 points
Principles of Macroeconomics
Spring 2018
Final Makeup
Name:
Part I. (60 points) Answer all questions in this part.
(1pt) 1. What is a business cycle?
(a) A long-run growth in economic wealth
(b) A short-run movements in inflation
(c) A short-run fluctuation in stock market returns
(d) None of the above
(1pt) 2. Dating when a recession begins and ends is a difficult job because
(a) Quarterly data is not available until a month after the quarter is over
(b) Political pressure influences the data collection process
(c) Data on economic activity is often misleading and wrong
(d) All of the above
(1pt) 3. In decomposing GDP using factor income approach, which category does Microsoft’s employee compensations
belong to?
(a) Consumption
(b) Profit
(c) Investments
(d) Wages
(1pt) 4. GDP can be calculated:
(a) Annualy
(b) Quaterly
(c) Monthly
(d) All of the above
(1pt) 5. Suppose nominal GDP was $1 trillion in 2015. In 2016, real GDP growth was 2%, price level increased by
3% and population growth was 1%. What was the nominal GDP in 2016?
(a) $1.02 trillon
(b) $1.04 trillon
(c) $1.05 trillon
(d) $1.06 trillon
(1pt) 6. Nominal GDP in 2008 was $100 billion and $102 billion in 2009. Real GDP growth in 2009 was 5%. Which
of the following is true?
(a) If 2008 is the base year, then GDP deflator in 2009 was less than 100
(b) GDP per capita growth in 2009 was slower than overall GDP growth
(c) The price level in the economy increased in 2009
(d) The economy experienced a recession in 2009
(1pt) 7. Which of the following is considered a growth disaster?
(a) Argentina
(b) South Korea
(c) United States
(d) Mexico
E1/1102-Spring 2018-Final Makeup – Page 2 of 19 – Name:
(1pt) 8. Solow model is best applicable to describe:
(a) Catch-up growth
(b) Cutting-edge growth
(c) Determination of the saving rate
(d) Income distribution
(1pt) 9. Suppose the economy described by the Solow model is in a long-run equilibrium. Suddenly, productivity
unexpectedly increases. What will happen to the marginal product of capital?
(a) Increases
(b) Decreases
(c) Remains unchanged
(d) It depends on other parameters
(1pt) 10. Consider an economy in a long-run equilibrium. What will happen to the long-run equilibrium capital stock
if the depreciation rate increases?
(a) Increases
(b) Decreases
(c) Remains unchanged
(d) It depends on other parameters
(1pt) 11. Which of the following may lead to GDP numbers being underestimated for developing countries compared
to the developed ones?
(a) Longer working hours
(b) Higher levels of pollution
(c) Larger share of population working in the informal sector
(d) All of the above
(1pt) 12. In the long run an increase in money supply growth rate, everything else being constant, will:
(a) Increase the average price level growth and output growth rate will not increase.
(b) Increase output growth rate and reduce the average price level growth.
(c) Reduce the average price level growth and output growth rate will not increase.
(d) Increase the average price level growth rate and output growth rate will increase.
(1pt) 13. In general, people prefer to have a consumption path that is:
(a) Smoother than their income path
(b) More volatile than their income path
(c) Exactly the same as their income path
(d) Negatively correlated with their income path
(1pt) 14. Which of the following is a good way of reducing moral hazard in the financial system?
(a) Passing a law forbidding the government from bailing out financial institutions.
(b) Reducing the amount of regulatory capital the banks need to hold.
(c) Allowing banks to invest the depositors’ money in any kind of asset, regardless of their risk.
(d) All of the above.
E1/1102-Spring 2018-Final Makeup – Page 3 of 19 – Name:
(1pt) 15. Which of the following is not a client of the Federal Reserve:
(a) TCF Bank
(b) Minnesota Timberwolves, a professional basketball team
(c) US Bank
(d) US Treasury Department
(1pt) 16. Which of the following will be a relevant cost of a high, but stable inflation?
(a) Decrease in the saving rate
(b) Wealth redistribution
(c) Menu costs
(d) All of the above
(1pt) 17. The overnight lending rate that banks charge each other is called:
(a) Discount rate
(b) Reserve requirement ratio
(c) Federal funds rate
(d) Money multiplier
(1pt) 18. There is a relationship between the amount of loanable funds demanded and the rate of interest
(a) positive
(b) direct
(c) negative
(d) both positive and negative
(1pt) 19. An increase in interest rates will lead to:
(a) an increase in bond prices
(b) an increase in aggregate demand
(c) a decrease in private investment
(d) a decrease in capital inflows
(1pt) 20. A bond is:
(a) a promise to pay back a loan over an unspecified period
(b) allows the firm to access funds with no liabilities
(c) the only way a firm can raise funds
(d) a document that promises to pay back a loan under specified terms over a specified period of time
(1pt) 21. Which of the following is not a major source of US federal expenditures:
(a) Social security.
(b) Medicare and medicaid.
(c) The police.
(d) The military.
(1pt) 22. Suppose the marginal tax is 10% for incomes below 20,000 and 30% for incomes above 20,000. Which of
the following is correct:
(a) An individual who makes 30,000 will pay 6,000 in taxes.
(b) The average tax rate of an individual who makes 40,000 is 25%.
(c) The average tax rate of an individual who makes 40,000 is 20%.
(d) An individual who makes 50,000 will pay 12,000 in taxes.
E1/1102-Spring 2018-Final Makeup – Page 4 of 19 – Name:
(1pt) 23. Imposing import tariffs on Chinese goods will:
(a) Make US consumers better off as they will buy higher quality American goods instead.
(b) Decrease welfare of US consumers who have to pay higher prices and benefit US producers of the
imported goods.
(c) Decrease domestic prices for the goods.
(d) Will increase total domestic surplus.
(1pt) 24. Consider the justification of protectionism using the spillover argument. Which of the following is true:
(a) No one really knows which industries are the ones with the important spillovers.
(b) Government officials always have much better information regarding important spillovers than local
entrepreneurs.
(c) Computer chips are highly expensive and produced in small quantities.
(d) Traditional brick and mortar firms like Walmart contributed much less to the growth in productivity in
the 90’s than digital stores like Amazon.
(1pt) 25. Suppose the US receives 10 billion dollars in international investment by Huawei. What will happen to the
US’s balance of trade assuming everything else is constant?
(a) US exports will increase by 10 billion dollars to pay back for the investment.
(b) US imports will decrease by 10 billion dollars to pay back for the investment.
(c) US balance of trade will decrease by 10 billion dollars.
(d) It’s not possible to say what will happen to the US’s balance of trade.
(1pt) 26. Consider the following statements regarding employment, which one is incorrect?
(a) New jobs constantly replace old jobs.
(b) The unemployed are adults who are looking for work and don’t have a job.
(c) The labor force includes the employed and unemployed populations.
(d) The working age population is the number of employed people above the age of 16.
(1pt) 27. Suppose the economy is hit with a negative real shock. The Fed decides to respond with an expansionary
monetary policy. What is the expected outcome of this policy?
(a) The Fed has no control over the outcome of a real shock
(b) More severe recession, but lower inflation
(c) Less severe recession, inflation close to the equilibrium level
(d) Less severe recession, but inflation problem gets worse
(1pt) 28. Consider a tax system where the first $20,000 of income is taxed at 20% rate and all income above is taxed
at 30%. If your income is $40,000, what is your marginal tax rate?
(a) 20%
(b) 25%
(c) 30%
(d) 40%
(1pt) 29. Which of the following is the largest source of revenue for the US federal budget?
(a) Corporate income tax
(b) Sales tax
(c) Tariffs and customs
(d) Individual income tax
E1/1102-Spring 2018-Final Makeup – Page 5 of 19 – Name:
(1pt) 30. The difference between federal spending and revenue is called:
(a) National debt
(b) Budget deficit
(c) Interest on the national debt
(d) Discretionary spending
(1pt) 31. In 2015, there were 10 million unemployed in Westeros. If the unemployment rate was 20%, what was the
size of the labor force?
(a) 10 million
(b) 20 million
(c) 50 million
(d) 200 million
(1pt) 32. Unemployment caused by long-run shifts in the importance and technology of different sectors of the economy
is called:
(a) Frictional
(b) Structural
(c) Sectoral
(d) Cyclical
(1pt) 33. Which of the following is an active labor market policy?
(a) Minimum wages
(b) Unemployment benefits
(c) Job search assistance
(d) Collective bargaining
(1pt) 34. International trade increases productivity through:
(a) Specialization
(b) Division of knowledge
(c) Exploiting gains from comparative advantage
(d) All of the above
(1pt) 35. Imposing a tariff on imports leads to:
(a) Decrease in consumer surplus and increase in producer surplus
(b) Increase in both consumer and producer surplus
(c) Increase in consumer surplus and decrease in producer surplus
(d) Decrease in both consumer and producer surplus
(1pt) 36. Adopting the currency of another country is called:
(a) Dollarization
(b) Currency union
(c) Fixed exchange rate
(d) Euro area
E1/1102-Spring 2018-Final Makeup – Page 6 of 19 – Name:
(1pt) 37. Structural unemployment can be caused by
(a) New information technologies that create new industries and destroy others
(b) Scarcity of job information
(c) Early employment bonuses
(d) All of the above
(1pt) 38. The World Bank "rigidity of employment index" is
(a) Uncorrelated to long-term unemployment across countries
(b) Negatively correlated to long-term unemployment across countries
(c) Positively correlated to long-term unemployment across countries
(d) None of the above
(1pt) 39. What is the dilemma the central bank faces when the economy is getting hit by a negative real shock?
(a) The central bank must choose between a lower growth rate and a lower inflation rate
(b) The central bank must choose between a lower growth rate and a higher inflation rate
(c) The central bank must choose between a higher growth rate and a higher unemployment
(d) The central bank must choose between a lower inflation and a lower unemployment rate
(1pt) 40. Why is monetary policy a crude means of "popping" the housing bubble?
(a) Because it’s difficult to know if the bubble exists in the first place
(b) Because it’s difficult to know the consequences of a bubble bust
(c) Because a bubble bust would stabilize the housing market
(d) Both A and B
(1pt) 41. Which of the following is/are true about the marginal tax rates?
(a) The marginal tax rates are set by the government
(b) The marginal tax rates affects incentives
(c) We would pay less tax if we use marginal tax rate instead of average tax rate
(d) Both A and B
(1pt) 42. What is the difference between a tariff and a quota?
(a) Tariffs creates deadweight loss while quotas do not
(b) Tariffs are a protectionism policy while quotas are not
(c) Tariffs are a restriction on the quantity of imported goods while quotas are a tax on imports
(d) Tariffs are a tax on imports while quotas are a restriction on the quantity of imported goods
(1pt) 43. What might prevent purchasing power parity to hold exactly?
(a) Transportation costs
(b) Some goods cannot be shipped
(c) Tariffs and quotas
(d) All of the above
(1pt) 44. Who would be included in the labor force?
(a) Karen, who works most of the week in a steel factory
(b) Zach, who works 20 hours a week, but is willing to work 40 hours
(c) William, who does not have a job, but is looking for work
(d) All of the above are included in the labor force
E1/1102-Spring 2018-Final Makeup – Page 7 of 19 – Name:
(1pt) 45. Which of the following causes a decrease in the labor force?
(a) a rise in the participation rate
(b) an increase in encouraged workers
(c) an increase in discouraged workers
(d) homemakers looking for market jobs
(1pt) 46. Suppose the nominal exchange rate between pounds and dollars is 1.10 dollars per pound. What would a
bottle of British soda cost in the U.S. if it costs 1 pound in England? This is all assuming that law of one
price holds.
(a) $0.5
(b) $0.9
(c) $1
(d) $1.1
(1pt) 47. Arbitrage creates mutually consistent exchange rates because
(a) it causes a currency to appreciate to balance imports with exports
(b) it causes a currency to depreciate to balance imports with exports
(c) when a currency is purchased at a low price in one market and sold at a high price in another, the prices
converge
(d) when a currency is sold at a low price in one market and purchased at a high price in another, the prices
converge
(1pt) 48. The trade balance is given by:
(a) the balance on current account
(b) exports minus imports
(c) income receipts minus income payments on investments
(d) the balance of unilateral transfers
(1pt) 49. The current account includes all of the following except:
(a) exports minus imports
(b) income receipts minus income payments on investments
(c) changes in U.S. assets owned abroad and foreign assets owned in the U.S.
(d) unilateral transfers of currency by individuals
(1pt) 50. Floating exchange rate refers to:
(a) new issues of foreign exchange offered on the market
(b) an excess demand for a nation’s currency that causes its devaluation
(c) an excess supply of a nation’s currency tat causes its appreciation
(d) an exchange rate determined by the demand for and supply of a nation’s currency
(1pt) 51. The quota on sugar placed by the U.S. government is to:
(a) restrict the quantity of sugar U.S. sugar producers can sell abroad
(b) raise government revenues from imports of sugar to the U.S.
(c) restrict the quantity of sugar that can be imported
(d) shift the domestic supply curve to the right in order to lower domestic sugar prices
E1/1102-Spring 2018-Final Makeup – Page 8 of 19 – Name:
(1pt) 52. A regressive income tax is one where the poor:
(a) have a lower percentage of their income taxed than the rich
(b) pay a larger dollar amount in taxes than the rich
(c) pay a tax that varies directly with their income
(d) have a higher percentage of their income taxed than the rich
(1pt) 53. Suppose the economy is hit by a negative velocity shock. If the Fed does not respond to this shock, inflation
in the long run will be:
(a) Higher than initially
(b) Lower than initially
(c) The same as initually
(d) It depends, the Fed might undershoot or overshoot.
(1pt) 54. If in a country it is allowed to receive the pensions together with a wage if a person continues working past
the retirement age, we would expect:
(a) A higher labor force participation for persons 65 and above
(b) A lower labor force participation for persons 65 and above
(c) No change in labor force participation for persons 65 and above
(d) It depends on the generosity of the pension system
(1pt) 55. Which of the following labor market regulations tend to increase unemployment:
(a) Strong labor unions
(b) High minimum wage
(c) High benefit replacement rates
(d) All of the above
(1pt) 56. Which of the following is included in the Current Account:
(a) The trade balance
(b) Net income from investments abroad
(c) Net transfer payments
(d) All of the above
(1pt) 57. If a US citizen buys a French government bond, the transaction is included in the:
(a) Current Account of the US
(b) Reserves of the US
(c) Capital Account of the US
(d) None of the above
(1pt) 58. The capital account and the current account usuallly:
(a) Move in opposite direction
(b) Move in the same direction
(c) Are completely uncorrelated
(d) None of the above
E1/1102-Spring 2018-Final Makeup – Page 9 of 19 – Name:
(1pt) 59. Dollarization implies:
(a) The country gives up independent monetary policy
(b) The country does not print its own currency
(c) The country cannot affect its exchange rate with respect to the Euro
(d) All of the above
(1pt) 60. What is the real exchange rate?
(a) It is the rate at which goods of one country can be exchanged for goods of another
(b) It is the rate at which one currency can be exchanged for another
(c) It is the rate at which government bonds of one country can be exchanged for another
(d) None of the above
E1/1102-Spring 2018-Final Makeup – Page 10 of 19 – Name:
Part II. (40 points) Answer all questions in this part.
(10pts) 1. International Trade: Suppose the following table represents Germany’s international transactions:
Germany’s transactions e
exports 25
imports 20
income receipts 10
income payments 5
unilateral transfers -2
(a) (3 pts) What is Germany’s balance of trade?
(b) (4 pts) What is Germany’s balance on current account?
E1/1102-Spring 2018-Final Makeup – Page 11 of 19 – Name:
(c) (3 pts) Suppose Germany change in capital account is −5. What is Germany’s change in reserves?
E1/1102-Spring 2018-Final Makeup – Page 12 of 19 – Name:
(10pts) 2. Consider a Solow economy with the saving rate of γ = 0.2, depreciation rate δ = 0.04 and production
function Y = A ∗ √K.
(a) (2 pts) Suppose A = 1. What is the steady-state level of capital? What is the steady-state level of
output?
(b) (2 pts) In this equilibrium, what are the steady-state levels of consumption and investment?
E1/1102-Spring 2018-Final Makeup – Page 13 of 19 – Name:
(c) (4 pts) Assume productivity parameter unexpectedly doubled. What will happen to the growth rate of
output in the short and long-run? Illustrate the old and new equilibrium on the graph.
(d) (2 pts) What will be the new steady-state levels of capital and output?
E1/1102-Spring 2018-Final Makeup – Page 14 of 19 – Name:
(10pts) 3. Monetary Policy
This question asks you to evaluate policy in the context of the AS-AD model from chapter 13.
(a) (2 pts) Draw the standard long run AS-AD equilibrium. Label all axes, curves, and the equilibrium of the
model.
(b) (1 pt) Suppose the Chairman of the Federal Reserve wants to decrease inflation and chooses a monetary
policy to achieve this goal. Draw a new graph in which you clearly show the initial equilibrium (before
the Fed changes its policy) and the short run equilibrium. What happens to inflation and real GDP growth?
E1/1102-Spring 2018-Final Makeup – Page 15 of 19 – Name:
(c) (2 pts) Now, draw a new graph in which you clearly show the initial equilibrium, the short run equilibrium
and the new long run equilibrium. What is the long run effect of the Fed policy on real GDP growth?
And on inflation?
(d) (2 pts) Return to part a) and now suppose the economy is hit by a positive wealth shock illustrate the
effect of this in both the short and long run.
E1/1102-Spring 2018-Final Makeup – Page 16 of 19 – Name:
(e) (3 pts) Explain why i.e. the underlying mechanism as to why the long run outcomes of the two shocks in
part c) and d) are different. You will want to start by explaining how the short-run outcomes are similar
in both c) and d). Hint: even though the curves move in different directions there is still a similarity
between the two scenarios in the short run!
E1/1102-Spring 2018-Final Makeup – Page 17 of 19 – Name:
(10pts) 4. Taxation: Consider the following marginal tax table:
Taxable Income Range Marginal Tax Rate
$0 - $10,000 10%
$10,000 - $20,000 20%
Above $20,000 75%
(a) (2 pts) Suppose Mary’s taxable income is $20,000. How much does a Mary owe in taxes?
(b) (2 pts) How much is the average tax rate to Mary? You may leave your answer as a fration.
E1/1102-Spring 2018-Final Makeup – Page 18 of 19 – Name:
(c) (2 pts) The government approves a law such that because of her low income, Mary is entitled to $2,500
tax return. What is her disposable income (after tax and transfers)?
(d) (2 pts) Suppose that Mary found a night job and now her income is $28,000. How much does Mary owe
in taxes now?
E1/1102-Spring 2018-Final Makeup – Page 19 of 19 – Name:
(e) (2 pts) Because of higher income, Mary is not entitled to the tax return anymore. Is Mary better off or
worse? Explain.
Final Makeup
Name:
Recitation # (6 pts):
Exam Version: 17-S-FMU
Time Limit: 120 minutes.
Guidelines: READ THEM!!
• Exams written in pencil will not be regraded. You must write in ink if you might want a regrade in the future.
Illegible answers will receive no credit.
• You must stay seated for the last 15 minutes of the exam.
• Each page may have its own directions. Follow directions carefully.
• For full credit, answers must be clearly justified. Graphs must be completely LABELED and math work shown. Do
not write too much! One sentence per point is a good estimate (but is NOT a rule); i.e. do not complain if you
write one sentence for a one point question and do not get full marks.
• There are no partial marks given for multiple choice.
The following WILL BE CONSIDERED CHEATING!
• Having any calculator out. NO CALCULATORS ALLOWED!!
• Having your cell phone out
• Having any notes out
• Collaborating with other students
This exam is 19 pages (not including this front page), numbered 1-19. Good luck!
Exam Record
Part1: / 60 points
Part2: / 40 points
Incorrect Section #: / -6 points
Total: / 100 points
Principles of Macroeconomics
Spring 2018
Final Makeup
Name:
Part I. (60 points) Answer all questions in this part.
(1pt) 1. What is a business cycle?
(a) A long-run growth in economic wealth
(b) A short-run movements in inflation
(c) A short-run fluctuation in stock market returns
(d) None of the above
(1pt) 2. Dating when a recession begins and ends is a difficult job because
(a) Quarterly data is not available until a month after the quarter is over
(b) Political pressure influences the data collection process
(c) Data on economic activity is often misleading and wrong
(d) All of the above
(1pt) 3. In decomposing GDP using factor income approach, which category does Microsoft’s employee compensations
belong to?
(a) Consumption
(b) Profit
(c) Investments
(d) Wages
(1pt) 4. GDP can be calculated:
(a) Annualy
(b) Quaterly
(c) Monthly
(d) All of the above
(1pt) 5. Suppose nominal GDP was $1 trillion in 2015. In 2016, real GDP growth was 2%, price level increased by
3% and population growth was 1%. What was the nominal GDP in 2016?
(a) $1.02 trillon
(b) $1.04 trillon
(c) $1.05 trillon
(d) $1.06 trillon
(1pt) 6. Nominal GDP in 2008 was $100 billion and $102 billion in 2009. Real GDP growth in 2009 was 5%. Which
of the following is true?
(a) If 2008 is the base year, then GDP deflator in 2009 was less than 100
(b) GDP per capita growth in 2009 was slower than overall GDP growth
(c) The price level in the economy increased in 2009
(d) The economy experienced a recession in 2009
(1pt) 7. Which of the following is considered a growth disaster?
(a) Argentina
(b) South Korea
(c) United States
(d) Mexico
E1/1102-Spring 2018-Final Makeup – Page 2 of 19 – Name:
(1pt) 8. Solow model is best applicable to describe:
(a) Catch-up growth
(b) Cutting-edge growth
(c) Determination of the saving rate
(d) Income distribution
(1pt) 9. Suppose the economy described by the Solow model is in a long-run equilibrium. Suddenly, productivity
unexpectedly increases. What will happen to the marginal product of capital?
(a) Increases
(b) Decreases
(c) Remains unchanged
(d) It depends on other parameters
(1pt) 10. Consider an economy in a long-run equilibrium. What will happen to the long-run equilibrium capital stock
if the depreciation rate increases?
(a) Increases
(b) Decreases
(c) Remains unchanged
(d) It depends on other parameters
(1pt) 11. Which of the following may lead to GDP numbers being underestimated for developing countries compared
to the developed ones?
(a) Longer working hours
(b) Higher levels of pollution
(c) Larger share of population working in the informal sector
(d) All of the above
(1pt) 12. In the long run an increase in money supply growth rate, everything else being constant, will:
(a) Increase the average price level growth and output growth rate will not increase.
(b) Increase output growth rate and reduce the average price level growth.
(c) Reduce the average price level growth and output growth rate will not increase.
(d) Increase the average price level growth rate and output growth rate will increase.
(1pt) 13. In general, people prefer to have a consumption path that is:
(a) Smoother than their income path
(b) More volatile than their income path
(c) Exactly the same as their income path
(d) Negatively correlated with their income path
(1pt) 14. Which of the following is a good way of reducing moral hazard in the financial system?
(a) Passing a law forbidding the government from bailing out financial institutions.
(b) Reducing the amount of regulatory capital the banks need to hold.
(c) Allowing banks to invest the depositors’ money in any kind of asset, regardless of their risk.
(d) All of the above.
E1/1102-Spring 2018-Final Makeup – Page 3 of 19 – Name:
(1pt) 15. Which of the following is not a client of the Federal Reserve:
(a) TCF Bank
(b) Minnesota Timberwolves, a professional basketball team
(c) US Bank
(d) US Treasury Department
(1pt) 16. Which of the following will be a relevant cost of a high, but stable inflation?
(a) Decrease in the saving rate
(b) Wealth redistribution
(c) Menu costs
(d) All of the above
(1pt) 17. The overnight lending rate that banks charge each other is called:
(a) Discount rate
(b) Reserve requirement ratio
(c) Federal funds rate
(d) Money multiplier
(1pt) 18. There is a relationship between the amount of loanable funds demanded and the rate of interest
(a) positive
(b) direct
(c) negative
(d) both positive and negative
(1pt) 19. An increase in interest rates will lead to:
(a) an increase in bond prices
(b) an increase in aggregate demand
(c) a decrease in private investment
(d) a decrease in capital inflows
(1pt) 20. A bond is:
(a) a promise to pay back a loan over an unspecified period
(b) allows the firm to access funds with no liabilities
(c) the only way a firm can raise funds
(d) a document that promises to pay back a loan under specified terms over a specified period of time
(1pt) 21. Which of the following is not a major source of US federal expenditures:
(a) Social security.
(b) Medicare and medicaid.
(c) The police.
(d) The military.
(1pt) 22. Suppose the marginal tax is 10% for incomes below 20,000 and 30% for incomes above 20,000. Which of
the following is correct:
(a) An individual who makes 30,000 will pay 6,000 in taxes.
(b) The average tax rate of an individual who makes 40,000 is 25%.
(c) The average tax rate of an individual who makes 40,000 is 20%.
(d) An individual who makes 50,000 will pay 12,000 in taxes.
E1/1102-Spring 2018-Final Makeup – Page 4 of 19 – Name:
(1pt) 23. Imposing import tariffs on Chinese goods will:
(a) Make US consumers better off as they will buy higher quality American goods instead.
(b) Decrease welfare of US consumers who have to pay higher prices and benefit US producers of the
imported goods.
(c) Decrease domestic prices for the goods.
(d) Will increase total domestic surplus.
(1pt) 24. Consider the justification of protectionism using the spillover argument. Which of the following is true:
(a) No one really knows which industries are the ones with the important spillovers.
(b) Government officials always have much better information regarding important spillovers than local
entrepreneurs.
(c) Computer chips are highly expensive and produced in small quantities.
(d) Traditional brick and mortar firms like Walmart contributed much less to the growth in productivity in
the 90’s than digital stores like Amazon.
(1pt) 25. Suppose the US receives 10 billion dollars in international investment by Huawei. What will happen to the
US’s balance of trade assuming everything else is constant?
(a) US exports will increase by 10 billion dollars to pay back for the investment.
(b) US imports will decrease by 10 billion dollars to pay back for the investment.
(c) US balance of trade will decrease by 10 billion dollars.
(d) It’s not possible to say what will happen to the US’s balance of trade.
(1pt) 26. Consider the following statements regarding employment, which one is incorrect?
(a) New jobs constantly replace old jobs.
(b) The unemployed are adults who are looking for work and don’t have a job.
(c) The labor force includes the employed and unemployed populations.
(d) The working age population is the number of employed people above the age of 16.
(1pt) 27. Suppose the economy is hit with a negative real shock. The Fed decides to respond with an expansionary
monetary policy. What is the expected outcome of this policy?
(a) The Fed has no control over the outcome of a real shock
(b) More severe recession, but lower inflation
(c) Less severe recession, inflation close to the equilibrium level
(d) Less severe recession, but inflation problem gets worse
(1pt) 28. Consider a tax system where the first $20,000 of income is taxed at 20% rate and all income above is taxed
at 30%. If your income is $40,000, what is your marginal tax rate?
(a) 20%
(b) 25%
(c) 30%
(d) 40%
(1pt) 29. Which of the following is the largest source of revenue for the US federal budget?
(a) Corporate income tax
(b) Sales tax
(c) Tariffs and customs
(d) Individual income tax
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(1pt) 30. The difference between federal spending and revenue is called:
(a) National debt
(b) Budget deficit
(c) Interest on the national debt
(d) Discretionary spending
(1pt) 31. In 2015, there were 10 million unemployed in Westeros. If the unemployment rate was 20%, what was the
size of the labor force?
(a) 10 million
(b) 20 million
(c) 50 million
(d) 200 million
(1pt) 32. Unemployment caused by long-run shifts in the importance and technology of different sectors of the economy
is called:
(a) Frictional
(b) Structural
(c) Sectoral
(d) Cyclical
(1pt) 33. Which of the following is an active labor market policy?
(a) Minimum wages
(b) Unemployment benefits
(c) Job search assistance
(d) Collective bargaining
(1pt) 34. International trade increases productivity through:
(a) Specialization
(b) Division of knowledge
(c) Exploiting gains from comparative advantage
(d) All of the above
(1pt) 35. Imposing a tariff on imports leads to:
(a) Decrease in consumer surplus and increase in producer surplus
(b) Increase in both consumer and producer surplus
(c) Increase in consumer surplus and decrease in producer surplus
(d) Decrease in both consumer and producer surplus
(1pt) 36. Adopting the currency of another country is called:
(a) Dollarization
(b) Currency union
(c) Fixed exchange rate
(d) Euro area
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(1pt) 37. Structural unemployment can be caused by
(a) New information technologies that create new industries and destroy others
(b) Scarcity of job information
(c) Early employment bonuses
(d) All of the above
(1pt) 38. The World Bank "rigidity of employment index" is
(a) Uncorrelated to long-term unemployment across countries
(b) Negatively correlated to long-term unemployment across countries
(c) Positively correlated to long-term unemployment across countries
(d) None of the above
(1pt) 39. What is the dilemma the central bank faces when the economy is getting hit by a negative real shock?
(a) The central bank must choose between a lower growth rate and a lower inflation rate
(b) The central bank must choose between a lower growth rate and a higher inflation rate
(c) The central bank must choose between a higher growth rate and a higher unemployment
(d) The central bank must choose between a lower inflation and a lower unemployment rate
(1pt) 40. Why is monetary policy a crude means of "popping" the housing bubble?
(a) Because it’s difficult to know if the bubble exists in the first place
(b) Because it’s difficult to know the consequences of a bubble bust
(c) Because a bubble bust would stabilize the housing market
(d) Both A and B
(1pt) 41. Which of the following is/are true about the marginal tax rates?
(a) The marginal tax rates are set by the government
(b) The marginal tax rates affects incentives
(c) We would pay less tax if we use marginal tax rate instead of average tax rate
(d) Both A and B
(1pt) 42. What is the difference between a tariff and a quota?
(a) Tariffs creates deadweight loss while quotas do not
(b) Tariffs are a protectionism policy while quotas are not
(c) Tariffs are a restriction on the quantity of imported goods while quotas are a tax on imports
(d) Tariffs are a tax on imports while quotas are a restriction on the quantity of imported goods
(1pt) 43. What might prevent purchasing power parity to hold exactly?
(a) Transportation costs
(b) Some goods cannot be shipped
(c) Tariffs and quotas
(d) All of the above
(1pt) 44. Who would be included in the labor force?
(a) Karen, who works most of the week in a steel factory
(b) Zach, who works 20 hours a week, but is willing to work 40 hours
(c) William, who does not have a job, but is looking for work
(d) All of the above are included in the labor force
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(1pt) 45. Which of the following causes a decrease in the labor force?
(a) a rise in the participation rate
(b) an increase in encouraged workers
(c) an increase in discouraged workers
(d) homemakers looking for market jobs
(1pt) 46. Suppose the nominal exchange rate between pounds and dollars is 1.10 dollars per pound. What would a
bottle of British soda cost in the U.S. if it costs 1 pound in England? This is all assuming that law of one
price holds.
(a) $0.5
(b) $0.9
(c) $1
(d) $1.1
(1pt) 47. Arbitrage creates mutually consistent exchange rates because
(a) it causes a currency to appreciate to balance imports with exports
(b) it causes a currency to depreciate to balance imports with exports
(c) when a currency is purchased at a low price in one market and sold at a high price in another, the prices
converge
(d) when a currency is sold at a low price in one market and purchased at a high price in another, the prices
converge
(1pt) 48. The trade balance is given by:
(a) the balance on current account
(b) exports minus imports
(c) income receipts minus income payments on investments
(d) the balance of unilateral transfers
(1pt) 49. The current account includes all of the following except:
(a) exports minus imports
(b) income receipts minus income payments on investments
(c) changes in U.S. assets owned abroad and foreign assets owned in the U.S.
(d) unilateral transfers of currency by individuals
(1pt) 50. Floating exchange rate refers to:
(a) new issues of foreign exchange offered on the market
(b) an excess demand for a nation’s currency that causes its devaluation
(c) an excess supply of a nation’s currency tat causes its appreciation
(d) an exchange rate determined by the demand for and supply of a nation’s currency
(1pt) 51. The quota on sugar placed by the U.S. government is to:
(a) restrict the quantity of sugar U.S. sugar producers can sell abroad
(b) raise government revenues from imports of sugar to the U.S.
(c) restrict the quantity of sugar that can be imported
(d) shift the domestic supply curve to the right in order to lower domestic sugar prices
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(1pt) 52. A regressive income tax is one where the poor:
(a) have a lower percentage of their income taxed than the rich
(b) pay a larger dollar amount in taxes than the rich
(c) pay a tax that varies directly with their income
(d) have a higher percentage of their income taxed than the rich
(1pt) 53. Suppose the economy is hit by a negative velocity shock. If the Fed does not respond to this shock, inflation
in the long run will be:
(a) Higher than initially
(b) Lower than initially
(c) The same as initually
(d) It depends, the Fed might undershoot or overshoot.
(1pt) 54. If in a country it is allowed to receive the pensions together with a wage if a person continues working past
the retirement age, we would expect:
(a) A higher labor force participation for persons 65 and above
(b) A lower labor force participation for persons 65 and above
(c) No change in labor force participation for persons 65 and above
(d) It depends on the generosity of the pension system
(1pt) 55. Which of the following labor market regulations tend to increase unemployment:
(a) Strong labor unions
(b) High minimum wage
(c) High benefit replacement rates
(d) All of the above
(1pt) 56. Which of the following is included in the Current Account:
(a) The trade balance
(b) Net income from investments abroad
(c) Net transfer payments
(d) All of the above
(1pt) 57. If a US citizen buys a French government bond, the transaction is included in the:
(a) Current Account of the US
(b) Reserves of the US
(c) Capital Account of the US
(d) None of the above
(1pt) 58. The capital account and the current account usuallly:
(a) Move in opposite direction
(b) Move in the same direction
(c) Are completely uncorrelated
(d) None of the above
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(1pt) 59. Dollarization implies:
(a) The country gives up independent monetary policy
(b) The country does not print its own currency
(c) The country cannot affect its exchange rate with respect to the Euro
(d) All of the above
(1pt) 60. What is the real exchange rate?
(a) It is the rate at which goods of one country can be exchanged for goods of another
(b) It is the rate at which one currency can be exchanged for another
(c) It is the rate at which government bonds of one country can be exchanged for another
(d) None of the above
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Part II. (40 points) Answer all questions in this part.
(10pts) 1. International Trade: Suppose the following table represents Germany’s international transactions:
Germany’s transactions e
exports 25
imports 20
income receipts 10
income payments 5
unilateral transfers -2
(a) (3 pts) What is Germany’s balance of trade?
(b) (4 pts) What is Germany’s balance on current account?
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(c) (3 pts) Suppose Germany change in capital account is −5. What is Germany’s change in reserves?
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(10pts) 2. Consider a Solow economy with the saving rate of γ = 0.2, depreciation rate δ = 0.04 and production
function Y = A ∗ √K.
(a) (2 pts) Suppose A = 1. What is the steady-state level of capital? What is the steady-state level of
output?
(b) (2 pts) In this equilibrium, what are the steady-state levels of consumption and investment?
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(c) (4 pts) Assume productivity parameter unexpectedly doubled. What will happen to the growth rate of
output in the short and long-run? Illustrate the old and new equilibrium on the graph.
(d) (2 pts) What will be the new steady-state levels of capital and output?
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(10pts) 3. Monetary Policy
This question asks you to evaluate policy in the context of the AS-AD model from chapter 13.
(a) (2 pts) Draw the standard long run AS-AD equilibrium. Label all axes, curves, and the equilibrium of the
model.
(b) (1 pt) Suppose the Chairman of the Federal Reserve wants to decrease inflation and chooses a monetary
policy to achieve this goal. Draw a new graph in which you clearly show the initial equilibrium (before
the Fed changes its policy) and the short run equilibrium. What happens to inflation and real GDP growth?
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(c) (2 pts) Now, draw a new graph in which you clearly show the initial equilibrium, the short run equilibrium
and the new long run equilibrium. What is the long run effect of the Fed policy on real GDP growth?
And on inflation?
(d) (2 pts) Return to part a) and now suppose the economy is hit by a positive wealth shock illustrate the
effect of this in both the short and long run.
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(e) (3 pts) Explain why i.e. the underlying mechanism as to why the long run outcomes of the two shocks in
part c) and d) are different. You will want to start by explaining how the short-run outcomes are similar
in both c) and d). Hint: even though the curves move in different directions there is still a similarity
between the two scenarios in the short run!
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(10pts) 4. Taxation: Consider the following marginal tax table:
Taxable Income Range Marginal Tax Rate
$0 - $10,000 10%
$10,000 - $20,000 20%
Above $20,000 75%
(a) (2 pts) Suppose Mary’s taxable income is $20,000. How much does a Mary owe in taxes?
(b) (2 pts) How much is the average tax rate to Mary? You may leave your answer as a fration.
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(c) (2 pts) The government approves a law such that because of her low income, Mary is entitled to $2,500
tax return. What is her disposable income (after tax and transfers)?
(d) (2 pts) Suppose that Mary found a night job and now her income is $28,000. How much does Mary owe
in taxes now?
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(e) (2 pts) Because of higher income, Mary is not entitled to the tax return anymore. Is Mary better off or
worse? Explain.
