Document Sample

Exam Code: 222 Department of Economics Intermediate Macroeconomics I Economics 152a – 001 Midterm Exam Student ID: ___________________________________ Name: ___________________________________ EXAM CODE: 222 TIME: 2 hours (7:00 – 9:00pm) INSTRUCTIONS: 1. Make sure that the exam code indicated above matches the one on your scantron sheet. 2. Make sure to fill in the blanks at the top of the Scantron sheet: your NAME, your SIGNATURE, you STUDENT NUMBER, your INSTRUCTOR’S NAME (Chiu), your COURSE NUMBER (Ec152a), your SECTION (001). 3. The exam consists of 50 multiple choice questions, 10 true/false questions. 4. Please record all your answers to the multiple choice and true/false questions on the Scantron sheet. Please use PENCIL only to fill in the Scantron answer sheet provided. 5. Programmable, graphing and cell phone calculators as well as translation dictionaries are NOT allowed. 6. GOOD LUCK! NOTE: QUESTIONS CONTINUE ON THE BACK OF EACH PAGE 1 Exam Code: 222 (A) Multiple Choice Questions (50 points) Choose the most suitable answer for each multiple-choice question in the appropriate space on the scantron sheet. 1. Consider a static optimization model with consumption-leisure choice. Labor supply is increasing in wage rate if a. the substitution effect dominates the income effect b. the income effect dominates the substitution effect c. the substitution effect dominates the price effect d. the income effect dominates the price effect 2. Real GDP per capita is a better measure of the living standard than real GDP because a. adjustment for inflation is made. b. adjustment for population growth is made. c. adjustment for home production is made. d. adjustment for black market is made. 3. To analyze the time series yt, we should a. decompose the time series log yt into trend and growth components. b. decompose the time series log yt into growth and business cycle components. c. decompose the time series yt into growth and business cycle components. d. decompose the time series yt into trend and growth components. 4. Consider a dynamic optimization model with consumption-saving choice of a consumer. Suppose an agent is neither a lender nor a borrower, then a. Saving is positive b. Current consumption equals current income if current lump sum tax is positive c. Current disposable income equals current consumption d. Current consumption equals current lump um tax Remarks: y-t=c+s, if s=0 y-t=c 5. The difference between GDP and GNP is a. Net factor payment b. Gross factor payment c. Cost of intermediate input d. Current account payment 2 Exam Code: 222 6. The relationship between observation and model is that a. we use observation to explain models b. we use observation to deduce model implications c. we use an economic model to test observation d. we use an economic model to explain observation 7. A lump-sum tax is a tax that a. can be avoided by strategic behavior. b. does not depend on the actions of the government. c. distorts economic decisions. d. does not depend on the actions of the economic agent being taxed. 8. The advantage of applying log-transformation to time series yt is that a. yt and log yt can give the same growth rate when the growth rate is small b. yt and log yt can give the same slope when the growth rate is small c. the slope of the graph of log yt can be interpreted as the growth rate of yt d. the slope of the graph of yt can be interpreted as the growth rate of log yt 9. A real and dynamic model is a. a single-period model without money b. a multi-period model with money c. a single-period model without money d. a multi-period model without money 10. When consumption and leisure are both normal goods, an reduction in real dividend income minus taxation, the rational consumer a. increases consumption and increases leisure. b. increases consumption and reduces leisure. c. reduces consumption and increases leisure. d. reduces consumption and reduces leisure. Remarks: Income reduction induces normal goods consumption to drop. 3 Exam Code: 222 11. To have export (X) higher than national output (Y) a. is impossible because a country cannot export more than the amount it can produce b. is impossible because consumption cannot be negative c. is possible when import is high. d. is possible when actual output is higher than the potential level Remarks: Y=C+I+G+X-M X-Y=M-C-I-G X-Y>0 when M is large 12. Consider two time series: X and Y Period X Y 1 1 -4 2 2 -2 3 3 0 The correlation coefficient between X and Y is a. -3 b. -1 c. 0 d. 1 13. In a one-period economy, all of the following are equivalent expressions of the budget constraint except a. C w( N s l ) T b. C wN s T c. C w(h l ) T d. C wl wh T 4 Exam Code: 222 Use the national expenditure account to answer the following question. $ Gross domestic product ? Personal expenditure on consumer goods and services 40 Durable goods 21 Semi-durable goods 5 Non-durable goods 3 Services ? Government current expenditure on goods and services 6 Total Investment ? Government gross fixed capital formation 4 Government inventories 4 Business gross fixed capital formation 6 Residential structures 4 Non-residential structures and equipment 2 Business investment in inventories 3 Exports of goods and services 4 Goods 2 Services 2 Imports of goods and services 2 Goods 1 Services 1 14. What is the GDP of the economy a. $65=40 + 6 + (4+4+6+3)+4-2 b. $69 c. $71 d. $75 15. In an economy with zero investment and zero government spending: a. consumption smaller than national output implies that export equals to import b. consumption smaller than national output implies that export is smaller than import c. consumption smaller than national output implies that import is smaller than export d. there is insufficient information to answer this question Remarks: Y=C+I+G+X-M & I=G=0 Y=C+X-M C-Y=M-X C<Y implies M<X 5 Exam Code: 222 16. The diagram below describes the employment decision of a firm. Which one of the points in the diagram indicates the situation MPN < w? d, Remarks: slope of production function = MPN < w = slope of total cost curve 17. Consider a static optimization model of a consumer. A rise in real wage rate will lead to a. an income effect only b. a substitution effect only c. an income effect and a substitution effect d. neither an income effect nor a substitution effect 6 Exam Code: 222 Use the information given below to answer the following question: 1.50 1.00 0.50 GDP 0.00 M 0 1 2 3 4 5 6 7 8 9 -0.50 -1.00 -1.50 time Volatility Cross Correlation of Real GDP Variable (% X(t-2) X(t-1) X(t) X(t+1) X(t+2) Std. Dev.) GDP 0.80 -0.74 -0.32 1.00 -0.32 -0.74 (a) 0.56 0.30 0.32 0.56 1.00 0.60 (b) 0.56 -0.32 1.00 -0.56 -0.61 0.60 (c) 1.56 -0.32 1.00 -0.56 -0.61 0.60 (d) 1.56 0.30 0.32 0.56 1.00 0.60 Remarks: counter-cyclical and less volatile 18. The above figure plots the cyclical behaviors of GDP and variable M. The first row of the above table reports the cross-correlation pattern of GDP. Among the remaining rows, which one best describes the pattern of variable M? 19. Consider a static optimization model of a consumer. The marginal rate of substitution MRSl,c a. is always equal to the wage rate b. is equal to the wage rate only for perfect substitutes c. is equal to the wage rate at the optimal consumption point d. is diminishing in the wage rate Remarks: at the optimal point: tangency of I-curve and budget line MRS=w 7 Exam Code: 222 Use the information given below to answer the following two questions: Cross correlation of real GDP Variable S.D. X(t-1) X(t) X(t+1) GDP 0.3 0.5 1 -0.5 Y 0.2 0.3 0.9 0.1 Z 0.7 - 0.5 0.2 0.4 20. Which one of the following statements is correct? a. Both Y & Z are pro-cyclical, but only Z is leading. b. Both Y & Z are pro-cyclical, but only Z is lagging. c. Both Y & Z are more variable than GDP and pro-cyclical. d. Both Y & Z are more variable than GDP, but only Y is co-incident. Remarks: Pro-cyclical: 0.9>0, 0.2>0; Z leading: |-0.5| largest in the row 21. In Canada, which one of the following variables has the same business cycle features as variable Y? a. Consumption b. Investment c. Money d. Price level Remarks: pro-cyclical, coincident, less volatile 22. The biggest expenditure component in the national expenditure account of Canada is a. Consumption b. Investment c. Government spending d. Export 8 Exam Code: 222 Consider the cyclical behavior of economy Q and answer the following two questions. Volatility Cross Correlation of Real GDP Variable (% Std. Dev.) X(t-5) X(t-4) X(t-3) X(t-2) X(t-1) X(t) X(t+1) X(t+2) X(t+3) X(t+4) X(t+5) Real GDP 2.00 0.02 0.15 0.38 0.63 0.85 1.00 0.85 0.63 0.38 0.15 -0.03 Consumption 1.00 0.25 0.41 0.56 0.71 0.81 0.82 0.66 0.45 0.21 -0.02 -0.21 Investment 8.00 0.04 0.19 0.39 0.60 0.79 0.90 0.75 0.50 0.21 -0.05 -0.26 Employment 2.00 -0.18 -0.04 0.14 0.36 0.61 0.82 0.89 0.82 0.67 0.47 0.25 Price level 0.80 -0.50 -0.58 -0.60 -0.60 -0.84 -0.68 -0.43 -0.31 -0.17 -0.04 0.09 Money 1.50 0.30 0.30 0.50 0.65 -0.50 -0.65 -0.70 -0.80 -0.90 -0.50 -0.24 23. Which of the following business cycle descriptions is wrong? Cyclicality Lead/Lag Variability Relative to GDP a Consumption Procyclical Coincident Smaller b Investment Procyclical Coincident Larger c Employment Procyclical Lagging Same d Price level Procyclical Leading Smaller e Money Countercyclical Lagging Smaller 24. Which of the following business cycle facts of economy Q is different from that of Canada.? a. Lead/lag pattern of investment b. Lead/lag pattern of employment c. Lead/lag pattern of money d. Variability of consumption 25. Use the information given below to answer the following question: Consider an economy with 2 goods. There are 2 firms and 2 consumers. Moreover, there is a government that employs workers and finances the wage payment by taxation. The income and expenditure flows in this economy in year 2000 are as follows: Firm 1 Firm 2 Output of good 1 = 1 units Output of good 2 = 2 units Price of good 1 =$? Price of good 2 =$? Interest payment =$1 Interest payment =$0 Wage payment =$1 Wage payment =$1 Tax payment =$0 Tax payment =$1 Consumer 1 Consumer 2 Wage income =$3 Wage income =$0 Interest income =$1 Interest income =$0 Profit income =$0 Profit income =$2 Expenditure on good 1 =$4 Expenditure on good 1 =$0 Expenditure on good 2 =$0 Expenditure on good 2 =$2 Tax payment =$0 Tax payment =$0 9 Exam Code: 222 We use year 1999 as the base year to compute the implicit GDP price deflator of 2000. Suppose in 1999, the price of good 1 is $3, the price of good 2 is $2 and the wage rate is the same as in 2000. The implicit GDP price deflator is _____________ . If we use chain-weighting method, the implicit GDP price deflator is _____________ . a. 114.29; 93.33 b. 114.29;107.14 c. 87.5;93.33 d. 87.5;107.14 26. The major difference between the growth component and the business cycle component of an economic time series is that a. the growth component is always increasing while the business cycle component is fluctuating over time. b. the growth component is constant over time while the business cycle component can change over time. c. the business cycle component captures the long run trend while the growth component captures the short run fluctuations of the trend. d. the growth component is the long run trend while the business cycle component is the deviation from the trend. 27. The log-approximation of growth rate of y t is accurate when a. y t is small b. log yt is small c. growth rate of yt is small d. growth rate of log yt is small 28. That indifference curves are downward sloping a. is not true. b. follows from the property that more is preferred to less. c. follows from the property that the consumer likes diversity in his or her consumption bundle. d. follows from the property that consumption and leisure are normal goods. 29. In a competitive equilibrium, the absolute value of the slope of the PPF is NOT a. equal to the marginal rate of transformation b. equal to the marginal rate of substitution c. equal to the marginal product of labor d. equal to the marginal utility of consumption 10 Exam Code: 222 30. Consider a static optimization model of a consumer, a. wage rate is an endogenous variable b. leisure choice is an exogenous variable c. consumption choice is an endogenous variable d. dividend income is an endogenous variable 31. Assuming all consumers are identical a. is realistic because agents are homogeneous b. lacks micro-foundation because it ignores the inequality issue c. is unrealistic but it can simplify the model d. is realistic because it can match real world data 32. Consider a two period model. Other things being equal, suppose the government increases current tax by T and reduces future tax by T/(1+r). Which of the followings is true? a. Higher current consumption b. Lower future consumption c. Lower saving d. Higher saving Remarks: y - t = c + s higher t implies lower s because c is unchanged according to Ricardian Equivalence Theorem 33. The basic components of a macroeconomic model involve all of the following except a. the available technology b. the preferences of consumers c. the available resources d. the optimal choices of firms 34. Consider a static optimization model of a consumer. Which of the following changes will lead to an income effect that increases consumption and leisure? a. decrease in wage rate w b. increase in lump sum tax T c. increase in dividend d. increase in consumption c 11 Exam Code: 222 35. Which of the followings is NOT a condition for the competitive equilibrium? a. MRT=w b. G=T c. MRS= w d. h=l 36. Consider a static optimization model of a consumer. Suppose U(c, l) = 2c+3l, h=10, w=2, =2,T=2, then optimal leisure is a. any l between 0 and h b. l=5 c. l=10 d. l=0 Remarks: w = 2 > slope of indifference curve = 3/2 leisure = 0 37. Consider a static optimization model of a consumer. Suppose the utility function is given by U(c, l) = min {c, al}. A reduction in parameter “a” leads to a. higher c and lower l b. higher c and higher l c. lower c and higher l d. lower c and lower l 38. $ GDP = 19 Consumption = 10 Government Spending = 4 Tax = 2 Net Export = 0 Net Factor Payment 1 The national saving of the above economy is a. 4 b. 5 c. 6 = Y + NFP –C –G =19 + 1 – 10 - 4 d. 7 39. Consider a static equilibrium model. Which one of the following conditions is not part of the competitive equilibrium? a. Optimal choices of consumers b. Optimal choices of firms c. Optimal choices of government d. Government budget constraint 12 Exam Code: 222 40. Consider the production decision of an individual firm. The condition for optimal employment of a firm is described by a. MRT=w b. MPK=w c. MPN=w d. MRS=MPN= w 41. Consider a static equilibrium model: Production function: Y=zKN Utility function: U=min[C,al] Moreover, K=2,z=1,G=2,h=10,a=1 What is the PPF and the MRT? a. C=18-2l and 2 b. C=18-2l and 1 c. C=20-l and 2 d. C=20-l and 1 42. What is the effect of a reduction in government spending on the PPF? a. Upward parallel shift b. Downward parallel shift c. Change the slope d. No change 43. Consider the consumption-saving choice of a borrower. What is the effect of a rise in future income? a. Lower current consumption due to income effect. b. Higher current consumption due to substitution effect. c. Higher future consumption due to income effect. d. Lower future consumption due to substitution effect. 44. Consider a two period model. If the government sells zero amount of bonds, then a. Current government spending is bigger than current taxation. b. Future government spending is bigger than future taxation. c. Future government spending equals future taxation. d. Current government spending equals future taxation. Remarks: T’=G’+B(1+r) & B=0 G’=T’ 45. Consider the employment choice of a firm, which of the following variables is exogenous? a. profit b. capital stock c. labor employment d. output 13 Exam Code: 222 14 Exam Code: 222 Use the budget line given in the graph below to answer the following 3 questions. Consider a static optimization model of a consumer. Suppose U(c, l) = min {c, al} with a=2: 46. What is the optimal choice of consumption C? a. 5 b. 6 c. 6.66 d. 8 47. What are the values of h, w? a. h=10, w=1.5 b. h=10, w=2 c. h=8, w=1.5 d. h=8, w=2 Remarks: x-intercept = 8, |slope| = 1.5 48. Which one of the following values of and T are not consistent with the graph? a. =10, T=6 b. =10, T=8 c. =12, T=10 d. =2, T=0 Remarks: when leisure = h = 8, C = - T =2 15 Exam Code: 222 49. Consider a static equilibrium model. PPF moving from FD to ED is a result of a. a rise of T b. a reduction in c. a rise in z d. a rise in w 50. Consider a static equilibrium model, a reduction in productivity z will lead to a. higher consumption b. lower wage rate c. higher output d. higher employment if substitution effect dominates 16 Exam Code: 222 (B) True/false Questions (10 points): Determine whether the following statements are true or false. If the statement is “true”, answer “A” on the scantron. If the statement is “false”, answer “B” on the scantron. (51) The value added of a firm in the U.S. owned by a Canadian is included in the GDP of US but not included in the GDP of Canada. T (52) Comparative statics studies the effect of endogenous variables on exogenous variables. F (53) In Canada, investment is a procyclical and coincident variable. T (54) Other things being equal, if the nominal GDP is overestimated, then the implicit GDP price deflator is under-estimated. F (55) The correlation coefficient between X and Y is equal to the covariance between X and Y divided by the sum of the standard deviation of X and the standard deviation of Y. F (56) Consider the two period consumption choice of a lender. If the real interest rate goes up, the current consumption may rise or fall. T (57) A correlation coefficient of zero indicates that the variables under study are unrelated. T (58) A firm operating at MPN > w should increase employment of labor. T (59) Assuming a preference of perfect substitutes satisfies the assumption that agents love diversity. F (60) Unemployment rate is defined as the number of unemployed divided by the total working age population. F *** END *** 17

DOCUMENT INFO

Shared By:

Categories:

Tags:

Stats:

views: | 11 |

posted: | 9/13/2012 |

language: | Latin |

pages: | 17 |

OTHER DOCS BY we9mj6AB

How are you planning on using Docstoc?
BUSINESS
PERSONAL

By registering with docstoc.com you agree to our
privacy policy and
terms of service, and to receive content and offer notifications.

Docstoc is the premier online destination to start and grow small businesses. It hosts the best quality and widest selection of professional documents (over 20 million) and resources including expert videos, articles and productivity tools to make every small business better.

Search or Browse for any specific document or resource you need for your business. Or explore our curated resources for Starting a Business, Growing a Business or for Professional Development.

Feel free to Contact Us with any questions you might have.