Macroeconomics-习题集3.docVIP

习题集三SECTION AALL QUESTIONS IN THIS SECTION ARE COMPUSLORY.FOR EACH CORRECT ANSWER 1 MARKS WILL BE AWARDED.FOR EACH INCORRECT ANSWER A PENALTY OF 0.25 MARKS WILL APPLY.WHERE NO ANSWER IS INDICATED A MARK OF ZERO WILL APPLY SUGGESTED TIME FOR THIS SECTION IS 60 MINUTESAnswer all questions in this section on the answer sheet provided at the back of this examination paper. For each question, indicate on the answer sheet the number of the response that, in your opinion, is correct. If you do not know the answer to a question, you may leave the space on the answer sheet blank.QUESTION 1One of the most significant differences between real business cycle theory and hysteresis theory is in the:a) Role of aggregate demand managementb) Length of the short runc) Social costs of unemploymentd) Long run response of the general level of prices to change in the quantity of moneyQUESTION 2Disagreements among macroeconomists can be generated by the different weights they apply to objectives even when their views about how the economy works are the same. This statement is:a) true.b) false.QUESTION 3The definition of the term long run is based directly on:a) time.b) macroeconomic adjustment.c) the natural level of output.d) the balance of trade.QUESTION 4Shift in the aggregate demand curve affect output in the short run in the medium run, output returns to its natural level.a) Trueb) FalseQUESTION 5In an economy there are 25 million people over 15 years of age, there are 15 million people employed and 5 million people unemployed. The unemployment rate is:a) 33.3 percentb) 25.0 percentc) 20.0 percentd) Impossible to calculate without further informationQUESTION 6Okuns Law is a relation between:a) Output growth and the change in the unemployment rateb) The unemployment rate and the inflation ratec) Output growth, money growth and the inflation rated) The unemployment rate, the inflation and money growthe) The government budget deficit and the current account deficit on the balance of paymentQUESTION 7In the context of the national income determination model, a change in autonomous spending will:a) Change the slope of the demand lineb) Change the slope of the production linec) Shift the demand line d) Shift the production lineQUESTION 8An important determinant of the slope of the IS curve is the size of the expenditure multiplier. The larger is the multiplier, the flatter will be the IS curve. This statement is:a) Trueb) FalseQUESTION 9If the net value of the autonomous and policy-determined expenditures in a close economy is $300 billion and the marginal propensity to consumer is 0.75, then equilibrium output is:a) $750 billion b) $225 billion c) $1,200 billion d) Impossible to calculate without further informationNote :Y = Z（equilibium condition of goods market）Y = Z C + I + G = c0 + c1(Y-T) + I + G (1- c1)Y= c0 + I + G - c1TY = 1/ (1- c1) (c0 + I + G - c1T )(c0 + I + G - c1T ) is the net value of the autonomous and policy-determined expenditure. So, Y = 1/ (1- c1) (c0 + I + G - c1T ) = 1/ (1- 0.75) * ( 300)=1200QUESTION 10When fiscal expansion and monetary contraction are applied simultaneously there must be:a) A decline in output b) An increase in outputc) An increase in the interest rated) A reduction in the interest rateQUESTION 11Which of the following lists contains that are all stock variables?a) Income, saving, investmentb) Wealth, saving, investmentc) Wealth, savings, quantity of moneyd) saving, quantity of money, investmentQUESTION 12Demand for money is related:a) positively to income and negatively to the interest rateb) positively to both income and the interest ratec) negatively to income and positively to the interest rated) negatively to both income and the interest rateQUESTION 13Bargaining power of a worker depends on:a) how costly it would be for the firm to replace him/her onlyb) how hard it would be for him/her find to find another job onlyc) both factors stated in (a) and (b) above d) neither factor stated in (a) and (b) aboveQUESTION 14The IS relation identifies all combinations of real interest rate and real income at which the:a) Goods market is in equilibrium.b) Money market is in equilibrium.c) Bond market is in equilibrium.d) Both the goods and money markets are in equilibrium.e) All of the goods, money and bond markets are in equilibrium.QUESTION 15When there is a large increase in the price of an input, such as energy, that is widely used in production, the natural rate of unemployment increases because the:a) price setting relation shifts upwardsb) price setting relation shifts downwardsc) wage setting relation shifts upwardsd) wage setting relation shifts downwardsQUESTION 16Following a disturbance to macroeconomic equilibrium that shifts either the IS or LM curve:a) output and the interest rate adjust slowlyb) output and the interest rate adjust instantaneouslyc) output adjusts slowly and the interest rate adjusts instantaneouslyd) output adjusts instantaneously and the interest rate adjusts slowlye) either output or the interest rate adjust, but not bothQUESTION 17In the medium run, the level of output is determined by:a) wage and price setting decisionsb) the capital stockc) the state of technologyd) more than one, but not all of the abovee) all of (a), (b) and (c)QUESTION 18When the actual level of output is at the natural level, we know that the actual price level is:a) Greater than the expected price levelb) Equal to the expected price levelc) Less than the expected price levelQUESTION 19Assume that the natural rate of unemployment is represented by t - t-1 = 10 2ut where :represents the rate of inflation; u represents the unemployment rate; and t represents the current time period. The natural rate of unemployment implied by this relationship is:a) 10 percentb) 5 percentc) 2 percentd) Impossible to calculate without further informationNote: t - t-1 = 10 2ut = -2(ut -5), so un=5%QUESTION 20Let: Z represent aggregate demand; C represent private sector consumption; I represent private sector investment; G represent government purchase; Q represent import; and X represent exports. Which of the following expression defines domestic demand?a) Z C + I + G + X Qb) Z C + I + G + X c) Z C + I + G d) Z C + I QUESTION 21Wages are determined by:a) The reservation wageb) The relative bargaining power of workers and employersc) The demand for labourd) all of (a), (b) and (c)QUESTION 22Which of the following statement represents a definition of the natural rate of unemployment?a) The natural rate of unemployment is that which occurs when the real wage implied by the wage setting relation is the same as the real wage implied by the price setting relationb) The natural rate of unemployment is that which occurs when the actual and expected rates of inflation are the samec) The natural rate of unemployment is the rate that is requires to keep the actual rate of inflation constantd) All of (a) and (b) and (c) above are equivalent definitions of the natural rate of unemploymentQUESTION 23If the expected price level increases, the a) Economy will move along the aggregate supply curveb) Aggregate demand curve will shift upwardsc) Aggregate supply curve will shift upwardsd) Actual price level will remain the sameQUESTION 24An expansionary monetary policy:a) Shifts the aggregate demand curve to the rightb) Has no effect on the natural level of outputc) Causes both the nominal and real interest rates to fall in the short rund) Is associated with (a) and (b) above onlye) Is associated with all of (a), (b) and (c)QUESTION 25If policy makers wish to change output and net exports, which of the following macroeconomic variables should they target?a) Government purchaseb) Taxes c) The real exchange rateQUESTION 26If a shareholder in a business is expecting a real dividend of $550 one year from now, what is the expected present discounted real value of that dividend if the real rate of interest is 10 percent per year now and is expected to remain at that rate?a) $495.b) $500.c) $550.Note: 550/(1+10%) = 500QUESTION 27If a real depreciation of the exchange rate is to improve the trade balance, it is necessary that the quantity of:a) Exports increase.b) Imports decrease.c) Exports increase and the quantity of imports decrease by enough to compensate for the increase in the price of imports.d) Exports increase and the quantity of imports decrease by enough to compensate for the increase in the price of imports and the increase in the government budgetdeficit.QUESTION 28Which of the following statements is not true?a) The Phillips curve is a kind of aggregate supply relation b) Capital accumulation occurs when the stock of capital in an economy increasesc) Changes in population and competitiveness will affect the position of the aggregate demand curve in the long run d) Macroeconomic policies that have desirable outcomes in the long-run also have desirable outcomes in the short-runQUESTION 29Which of the following statements is true when wealth can be held as money or bonds only and consumption is determined by current income only?a) Demand for money and demand for bonds are independent of each other b) Other things being equal, an increase in wealth causes the demand for money to increasec) Other things being equal, an increase in the interest rate leads to an increase in the demand for bondsd) More than one of the statement above is truee) None of the above statements is trueQUESTION 30As the interest rate on bonds increases, demand for moneya) Increasesb) Decreasesc) Remains the samed) Changes only if the increase in the interest rate is accompanied by a decrease in outputQUESTION 31If the central bank purchase government bonds on the open market (open market operations), a macroeconomist would conclude that it wishes to impact:a) Aggregate demandb) Real incomec) The nominal interest rated) The real interest rateQUESTION 32The real exchange rate is defined as the:1.Price of foreign currency in terms of domestic currency.2.Price of foreign goods in terms of domestic goods.3.Price of foreign goods divided by the price of domestic goods4.Nominal exchange rate divided by the domestic price index.QUESTION 33Which of the following statements may be assumed to be true in macroeconomic modelling?a) Both the IS and LM relations depend on the nominal interest rate.b) The difference between the real interest rates on money and bonds is normally less the expected inflation rate.c) Money has a zero real interest rate.d) More than one of the statements above is true.e) None of statements above is true.QUESTION 34Remittances made by foreigners back to their families at home are included in the balance of payments in the:a) Trade accountb) Current accountc) Capital accountd) Either the current or capital account depending on the source of income accruing to those foreignersQUESTION 35If the inflation rate in Australia in 2000 is expected to be 5.5 percent and the nominal interest rate is expected to be 7.5 percent per year, the real interest rate is expected to be approximately:a) 2.0 percent per year.b) zero.c) 2.0 percent per year. d) 5.5 percent per year.e) 7.5 percent per year.QUESTION 36If a nations current account on the balance of payment is negative, it must:a) Borrow from the rest of the worldb) Sell some of its foreign assetsc) Borrow from the rest of the world and /or sell some of its foreign assetsQUESTION 37Introducing expectations into the IS-LM model can be expected to make:a) The IS curve steeper without affecting the LM curveb) The IS curve flatter without affecting the LM curvec) Both the IS curve and the LM curve shiftQUESTION 38The smaller is an open economy in terms of its share of world gross domestic product the:a) Smaller will be the value of its multiplierb) Larger will be the value of its multiplierQUESTION 39If the expected discounted present value of a planned investment project is less than the cost of that investment project, a business firm should:a) Borrow and proceed with the projectb) Proceed with the project only if there are sufficient internal funds to finance the projectc) Not proceed with the projectQUESTION 40The real value of imports is found by multiplying the nominal value of imports by the:a) Nominal exchange rateb) Real exchange ratec) Terms of traded) Domestic price IndexSECTION BALL QUESTIONS IN THIS SECTION ARE COMPUSLORY.EACH ANSWER IS WORTH A MAXIMUM OF 10 MARKS.UP TO 2 MARKS MAY BE DEDUCTED FORFUNDAMENTAL ERRORS IN AN ANSWER.WHERE A QUESTION IS NOT ANSWERED A MARK OF ZERO WILL APPLY.SUGGESTED TIME FOR THIS SECTION IS 30 MINUTES.Answer all questions in this section in your examination answer booklet.QUESTION 41Consider the following equation:Un = (+ z) /Where Un is the natural rate of unemployment, represents the markup, z represents the factors that affect wage setting andrepresents the effect of the actual unemployment rate on inflation.Assume that expected rate of inflation is equal to last years inflation rate.Calculate the actual unemployment rate if the change in inflation is 0.01 (one-percentage point), the natural unemployment rate is 10% and the effect of the actual unemployment rate on inflation is 1.2.Answer:(1) un = (m+ z) /a(m+ z) = aun(2) pt = pet + (m + z) aut (p186) pt = pet + aun aut pt - pet = - a( ut un )(3) If pet = pt-1, thenpt - pet = - a( ut un )pt pt-1 = - a( utun) (the Phillips curve)1% = -1.2(ut -10%)ut = 9.17%QUESTION 42a) Define the following terms:b) Efficiency wagec) Yield to maturity (also know as the n-year interest rate)d) Marshall-Lerner conditione) Seignorage QUESTION 43Suppose that the economy is characterized by the following behavioral equations:C= 160 + 0.6 Y D I = 150G = 150T = 100Solve for:a) Equilibrium GDP (Y)b) Disposable income (YD)c) Consumption spending (C) and multiplierAnswer:a) Y = Z C + I + G = c0 + c1(Y-T) + I + G (1- c1)Y= c0 + I + G - c1TY = 1/ (1- c1) (c0 + I + G - c1T ) = 1/ (1- 0.6) ( 160+150+150-0.6*100)=1000b) YD = Y-T =1000-100 = 900c) C = 160 + 0.6 Y D = 160 + 0.6*900 = 700 multiplier = 1/ (1- c1) = 1/ (1- 0.6) = 2.5Assume that G is now equal to 110. Calculate a) Equilibrium outputb) Private and public savingAnswer: a) Y = 1/ (1- c1) (c0 + I + G - c1T ) = 1/ (1- 0.6) ( 160+150+110-0.6*100)= 900b) Private saving: S = Y T - C = Y T -c0 + c1(Y-T) = 900 100 -160 + 0.6(900-100) = 160Public saving: T G = 100-110 = -10 ECTION CANSWER ONE (1) QUESTION FROM THIS SECTIONEACH ANSWER IS WORTH 30 MARKS.UP TO 5 MARKS MAY BE DEDUCTED FOR FUNDAMENTALERRORS IN AN ANSWER.WHERE A QUESTION IS NOT ANSWERED A MARK OF ZERO WILL APPLY.SUGGESTED TIME FOR THIS SECTION IS 30 MINUTES.Answer your chosen question from this section in your examination answer booklet.QUESTION 44Answer both parts of this question.a) Many governments have focused microeconomic reform policies on encourag