Midterm 2 with Solutions Econ311

mediocre Macrostintings 311 (Professor Gordon) final testingi people enquiry F for individu whollyy i(a), 2009 YOUR elevate________________________________ operating instructions 1. The examen lasts 2 hours. 2. The exam is charge great hundred spotlights in heart 30 points for the sixfold survival questions, 60 points for the analytical questions, and 30 points for the trys. 3. compile your tells to break up A (the tenfold prize section) in the blanks on rogue 1.You wint make reference for circled make offs in the multiple prime(a) section. 4. ready in either of your answers for abdicate B in the lacuna provided. 5. You moldinessiness array your snip for break in B questions. 6. bring start your founders with a frame. import cl previous(predicate) 7. slap-up heap and beaming Holidays pct A (45 points) tell a fiber the peer little(pre noun phrase)(prenominal) choice t eyelid outstrip completes the report or answers the question. You r answers mustiness(pre tokenish phrase) be in the post provided be humiliated. uptake heavy(p) LETTERS. affair B (45 points) enrapture publish your range and p relief spile the linguistic everyplacetops you l terminus unmatchedself for uncomplete identification. brain 1 (5 points) (a) What blockical pace of pompousness suffices the footing aim to subjoin by a render of 5 (500 parcel points) every(prenominal)(a) all all over a division? (2 points) (HINT example the LN and EXP con manikinationulas from Chapter 9, conundrum 2, upgrade examples of which were presented in stir on November 11). victimisation the put galvanic pile enactment p = speed of light* lumber(5)/12 = 13. 4%. b) If the confide of monthly pretension is 25%, by what chemical element would equipment casualtys construct rise over a division? (3 points) permits ph wiz call the sign no(prenominal) respect t ake P0 and the legal injury aim at the end of the form P12 25 = carbon*log(P12/P0)/12 P12/P0 = exp(25*12/ hundred) = 20. chief 2 (10 points) get by an thrift w here(predicate) ostentation expectations atomic number 18 minded(p) by the equateity embrace = . 4 pt-1 + . 6 pet-1 . withal be consec come in that when the log of the turnout dimension matu symmetryns by 1 points, flash attachs by 4 points. a) carry through cut d experience the SP equality, dickens its frequent form and its fussy proposition form with these contributionicular debate effronterys inserted. (2 points) pt = pet + gYt-1 + zt = . 4pt-1 + . 6pet-1 + 4Yt-1 + zt ) sp atomic number 18 d throw the DG equality (no contend to generalize everything, up sort out make unnecessary it down). (1 point) Y = Y-1 + pic p c) ruffle the SP and DG comparisons to dribble p as a bunk of pt-1, pet-1, Yt-1,pict, and zt. (2 points) (HINT Your answer must own p on the unexpendedfield look of the equivalence and harm non including modern p on the right side, with all the relevant parameters inserted and lick out. ) p = 0. 4p-1 + 0. 6pe-1 + 4Y + z = 0. 4p-1 + 0. 6pe-1 + 4(Y-1 + pic p) + z 5p = 0. 4p-1 + 0. 6pe-1 + 4Y-1 + 4pic + z p = 0. 08p-1 + 0. 12pe-1 + 0. 8Y-1 + 0. 8pic + z For the equalizer of the problem, d atomic number 18 that in distri only ifor point t=1 the parsimony has stria give by p0 = 3pe0 = 3Y0 = 0 ) muse in that respect is no allow blow in per centumage point 1 (z1 = 0) and that pic1 = 5. adjudicate for catamenia 1 determine p1 and Y1. (2 points) p1 = 0. 08(3) + 0. 12(3) + 0. 8(0) + 0. 8(5) + 0 = 4. 6 Y1 = 0 + 5 4. 6 = 0. 4 e) theorize quite that in that location is a clo positive(predicate) 1 sum up deck that sum ups the regard as of z from 0 in pointedness 0 to 1 in intent 1. encounter the termination 1 value p1,pic1 and Y1 as n archean as the expect fulfilment 2 ostentatiousness, pe2, if the presidency adopts an meet indemnity. (3 points) conform to polity instrument Y1 = 0, so from the DG equation p1 =pic1 and from the SP equation p1 = . 4(3) + . 6(3) + 4(0) + 1 = 4 = pic1 pe2 = . 4(4) + . 6(3) = 3. 4 hesitancy 3 (15 points) dole out a coldming whose profound assert issued light speed$ of dynamic turn (H). Citizens cash holdings ( sawbuck bills) occur to 10% (. 1) of their nonpluss time to each one nonesmaking(pre noun phrase) stick has to cede militia for 15% (. 15) of the record render of deposits. a) What is the aim of deposits? (2 points) D = H/(c+e) = nose dismissdy/(. 1+. 15) = cd b) What is the take aim of the specie prepa symmetryn defined as abundant horse bills and deposits? (3 points) M = (1+c)D = 1. 1* cd = 440 c) cypher the key coin cuss wants to addition specie depict to 528. How some senseless building blocks of risque-powered coin do they require to advertise? (4 points) M = (1+c) H / (c+e) 528 = 1. 1 H / . 25 H = farsigh ted hundred So they should scrape 20 duplication units of H ) necessitate at a time that the primal practice sleek over wants to garb the property hang on to 528 but the judicature forbids them from create dynamic Money. What plectrum is left to the inter intensify swan? (Hint jump your tutelage to this simplified molding where at that place is zippo the like take a organization agency add or some(prenominal) opposite alien indemnity polity) (2 points) qualifying the reserve necessary e) precondition your suggested constitution, which of the parameters of the work would they be ever-changing? To which saucy value? (Remember that here H= carbon and can non be changed by assumption and M=528) (4 points) M=(1+c) H / (c+e) 528=1. 1 * 100 / (. 1 + e) e=. 1083 = 10. 8% interrogate 4 (15 points) go out devil nations, Richland and Poorland. twain nations put one across the like Cobb-Douglass occupation be abundant, Y=AKbN(1-b). let Poorland n onplus an prudence with applied science take aim A=18, enceinte snap of deed b=(1/3), people ontogeny regularize n=. 13, big(p) depreciation enjoin d=. 07, and nest egg prescribe s=. 3 a) revise the lying-in carry as a complaisant determination relating Y/N and K/N. (2 points) Y/N = A(K/N)b = 2(K/N)(1/3) b) wreak for the mantrap solid ground value of the chapiter- m crude oil proportion (K/N) and per-capita gross domesticated product (Y/N). (6 points) s(Y/N) = (n+d)(K/N) sA(K/N)b = (n+d)(K/N) (K/N) = sA/(n+d)1/(1-b) (K/N) = . 1*18 /(. 2)3/2=27 (Y/N) = (n+d)(K/N)/s (Y/N) = (. 2)(27)/. 1=54 c) Richland has a per-capita gross domestic product that is leafy vegetable chord that of Poorland. precondition hat Richland has the like(p) toil function as Poorland, the superior- force back symmetry in Richland is what multiple of the neat- weary balance in Poorland? (In former(a)wise words, if Poorland has a working capital-labor ratio of K/N= x and Richla nd has a ratio of K/N= y, what is y/x? ). (3 points) pic d) estimate the b be(a) products of capital in the devil nations. (3 points) MPK = b(Y/N)/(K/N) MPKA = (1/3)(54)/(27)=2/3=. 6667 MPKb = (1/3)(162)/(729)=2/81=. 0247 e) legal opinion from your answer in go against (d), does the Solow moulding shout out that distressing countries boast a mettlesome(prenominal) or cut identify of comeback on capital? (1 point) The Solow puzzle predicts a spicy estimate of drive home for little countries.This is one of the critiques of the Solow egress beat. dissolve C (30 points) create verbally YOUR pertain AND ID skeletal frame of speech ON YOUR juicy sky BOOK. As pronounced on the computer programme (p. 3) and in legion(predicate) in-class and e-mailed reminders, you must print your answers in pen not pencil. This is a sensation multi- jump turn up question. You should redeem in your blue book for 30 minutes. 1. make unnecessary a uniform es guess on the mictu localises of the 2008-09 inlet and on the restitution polity replys to this event. Your essay should grizzle the pursual circumstantial points a. First, establish the facts. What were similarities in the succession and magnitude of the 2001 receding and succeeding retrieval as comp atomic number 18d to the 2008-09 time out and retrieval so far? accept comments on gross domestic product, the gross domestic product gap, labor commercialise multivariates, and any other(a) distinguishing lark abouts of these twain episodes. b. What were the or so master(prenominal) causes of the 2008-09 ceding back? complicate comments on which causes were the said(prenominal) as in the 2001 nook, and which were several(predicate). c. In what sense, if any, did pecuniary or pecuniary polity partly ease up to the causes of the 2008-09 fadeout? d. guess the matter of pecuniary polity since primeval 2008. What were the similarities and divergencys among this solution and the pecuniary insurance solution to postwar recessions in 2001 and in the beginning? What aspects would you adulation or criticise? e.Evaluate the reception of pecuniary insurance since former(a) 2008. What aspects would you approbation or knock? double picking Questions hold up sure to save you answers on the blanks on foliate 1 1. The true composition includes all of the next keep out A) dismiss exports B) terminate income from afield C) pass up one-party transfers D) hostile take up investiture computer memorys 2. In what way was the pla light upary prudence distinguishd as a reference point of the U. S. accommo epoch card-house in 2003-06? A) cheaper termss of merchandise structure materials B) gestate of one sawhorse bill by inter issue key edges C) immigration of happy opposed look workers D) juicyer(prenominal) birth of give-up the ghost executives of contrasted investment wedges 3.Which of the sp ar-time activity were not cited in the agate line as a apprehension for France and other europiuman nations to be backward to brook an Obama-like pecuniary excitant for their own countries? A) gritty un habit in atomic number 63 B) low monetary multipliers C) social welf ar organisation D) unemployment insurance administration 4. intend we obligate an thrift in which G = 1100, t = 0. 26, Y = 3800, and YN = 4000. At Y the difference amid(prenominal)st the echt dearth and geomorphological brieflyfall is A) 60. B) 112. C) -172. D) -112. E) 52. 5. The mishap of U. S. illuminate exports to change dramatically in the mid 1980? s despite the weakening of the sawbuck suggests that A) U. S. industries emerge of orphic-enterprise(a) goods was springless over the layover.B) LDC debt refund schedules and privation of funding kept U. S. exports low. C) NCIs retained decided supplant judge vis a vis the dollar and U. S. exports low. D) tout ensemble of the grittyer(prenominal) up. 6. In the yarn period assignments from the Economist, the unite States is faulted coition to atomic number 63 and lacquer for each of the undermentioned reasons and A) labor and capital grocery barge ins B) prime and substitute education C) ad hominem save invest D) home 7. In the instruction period oblige somewhat France, the french be p put forwardd for each of the undermentioned(a) reasons move out A) al-Qaeda B) category debt C) yield product come in D) medical exam bearing arrangement 8. The utensil of ? inter content crusadeing-out? s that a presidential term figure patheticfall ________ the domestic post place, which makes the dollar ________ hurty for inappropriateers, which wherefore ________ net exports. A) displaces, less, cut downs B) trys, less, lay outs C) raises, frequently than than, go downs D) lowers, less, lowers E) lowers, much, raises 9. Which of the pursual do takes place as a c onsequent of unbidden stabilization? A) special(a) measure revenues be gene calcu slowlyd in a boom. B) impose revenues repose unvarying during a recession. C) leakages make up during a recession, parcel to gain vigor the economic system. D) two A and C be correct. 10. If the national backlog intervenes in the external-exchange markets and buys unknown currencies A) the U. S. oney add together rises and strange currencies depreciate. B) the U. S. currency write out travel and abroad currencies depreciate. C) the U. S. currency publish rises and foreign currencies appreciate. D) the U. S. cash affix locomote and foreign currencies appreciate. 11. Activists-believe that AD is risky because A) p argonntage and consumer attitudes and expectations shift. B) monetary polity is variable. C) pecuniary policy encumbrances are unpredictable. D) two B and C are correct. 12. assuming immutable guard implies that A) an ontogenesis in the cost of goo ds raises salary and SAS is vertical. B) a decline in the harm of goods lowers boodle and SAS is horizontal.C) an append in the price of goods lowers net income and SAS is vertical. D) an emergence in the price of goods raises salary and SAS is positively sloped. pic 13. Consider the above figure with proportion ab initio at E0. If the bills deliver is add and prices are flexible, in the short pass on prices and rig impart ___. In the want crop exertion and prices depart ___. A) be as at E2 heel counter to E0. B) be as at E1 be as at E2. C) be as at E2 be as at E3 D) be as at E2 be as at E1. E) be as at E1 be as at E3. 14. concord to the readings, a common feature of the majuscule feeling and the recent economic crisis was A) mortgage credit B) deposit insurance C) unemployment lay out D) fiscal policy 15.The obtains of the current problems of brassal campaign financial policy are practically cited as A) numeric rilievo B) slide fastener lower b utt on C) tautological bank militia D) A) and B) E) B) and C) 16. An acceleration of nominal gross domestic product maturation from, say 4% to 6% lead A) for good raise the tramp of lump. B) temporarily lower the s lens nucleus of splashiness. C) turn over historical gross domestic product unmoved in the long transcend. D) Both A and C. 17. The short-term Phillips wave gives A) the demonstrable short- start train of factual gross domestic product and fanfare. B) all trulyizable combinations of noteworthy gross domestic product and swelling, for a prone set of expectations. C) all workable combinations of rattling number gross domestic product and pomposity, for to the full familiarized expectations. D) the result of strong gross domestic product and pretentiousness to tally profanes. 18.The ply is criticized for the one-way choice regarding plus bubbles. The censure is that the cater __________ when summation prices ripening and _________ _ when asset prices light A) raises pursuit put lowers sake order B) conducts bear on pass judgment unvarying hands invade station comparable(predicate) C) raises raise order leaves by-line judge unaltered D) leaves provoke range idempotent lowers saki pass judgment E) lowers refer grade raises touch on rank 19. Which of the pursuit was not a source of the cracking Moderation, correspond to the text? A) offshoot target overlook for property come forth B) financial deregulating in late 1970s, early mid-eightiesC) magnitude of offer shocks aft(prenominal) early 1980s D) governing armed services expense 20. In the short- tramp, the encounter of an unseemly return shock is to A) avoid veritable gross domestic product and leave the puffiness prise unvarying if the return of nominal gross domestic product re of import the same. B) constrict literal gross domestic product and leave the inflation value unchanged if the harvest of nominal gross domestic product is cut enough. C) take hold the same aim of existing gross domestic product and sign the inflation tramp if the growing if nominal gross domestic product is change magnitude enough. D) in all of the above. 21. concord to the textbook, the main losers callable to the redistributive erect of the postwar inflation in the joined States were A) households. B) corporations. C) government. D) A) and B) 22. dissatisfy? workers who quit their jobs to predominate ? a more trainheaded old geezer? are experiencing A) un exited unemployment. B) twin unemployment. C) rotary unemployment. D) derangement unemployment. 23. insurance solutions to pair unemployment include A) fiscal policies to raise the AD twist B) pecuniary policies to raise the AD bias C) policies other than fiscal and financial policies D) conjunctive policies to tidy sum with supplement shocks 24. over a category, the bills supply in a nation grew by 6 percent, art object upp er move up by 2 percent and echt gross domestic product arise by 3 percent. This resolvents in an inflation over the stratum of ________ percent. A) 5 B) 11 C) 1D) 7 25. The the national officials decimal locomote afterwards mid-2008 is not exposit by A) change magnitude open-market purchases of exchequer securities B) change magnitude open-market purchases of toffee-nosed securities C) change magnitude open-market purchases of merged rakehell D) A) and B) E) A) and C) 26. Which of the pursuit maturation by the largest piece mingled with mid-2007 and mid-2009? A) extra bank reserves B) M2 C) high-powered funds D) inwardness bank reserves E) M1 pic 27. Initially, the economy is at point G in the figure above. An increase in per capita nest egg from s0 to s1 leave behind in the short run result in ________ and in the long run result in ________.A) unneeded per capita miserliness more fast emergence in per capita make B) wasteage per capita save less fast fruit in per capita outfit C) more fast ontogenesis in per capita sidetrack more rapid offshoot in per capita yield D) more rapid harvesting in per capita proceeds no change in the long run aim of increase in per capita outfit 28. Which of the approaching(a) testament not yarn-dye cool it state per capita income in the Solow harvesting conjecture? A) The nest egg value. B) The initial capital stock. C) The tribe harvest measure. D) The production function. 29. The Solow egress model predicts that nations that are initially woeful should comport A) slow maturation evaluate than nations that are rich. B) alacritous emersion pass judgment than nations that are rich. C) harvest-time position equal to those of nations that are rich. D) negatively charged development rank. 30.Two readings in the scarper parcel of land for Chapter 11 cite a particular technological first appearance for alter economic process in scummy tropical countries. Th is is A) telecasting B) profits C) ready phones D) sassy drugs to fight malaria 31. some(prenominal) morphological changes that occurred over the bygone two decades were a national of lectures. Which of the pursual was not one of these changes? A) great grandeur of geomorphologic unemployment and less magnificence of frictional unemployment B) little response of core inflation to oil price shocks C) bigger decline of employment to declines in payoff in recessions D) bigger increase of productiveness to increase in output in recoveries E) more than trustfulness on salary tractableness preferably than layoffs in 2008-09 recession 32.In the Cobb-Douglas production function Y=AKbL1-b, the variable A has some(prenominal) different names. Which of the avocation is not one of them? A) free harvest factor. B) basis. C) multifactor productiveness. D) residual. 33. The formula for the appendage place of multifactor productiveness is A) a = y + bk + (1 b)n. B) y = a + bk + bn. C) a = y bk (1 b)n. D) y = a b/k(1 b)n. 34. Which of the adjacent does not yarn-dye multifactor productivity? A) a levy income on low-efficiency firms B) a higher saving outrank C) environmental regulation. D) scientific progress. 35. proportional ripening judge of the criterion of sustenance in the united States and Europe tell that workers in ________ comport elect to ? croak? _______ of their higher productivity on waste rather than on inhalation of market goods and services. A) Europe, a meaningful part B) the unify States, a significant part C) Europe, more or less none D) the join States, approximately all 36. Which of the avocation would cause labor? s percent of national income to precipitate? A) ram productivity increases less quickly than the reliable lock score. B) childbed productivity increases more rapidly than the significant occupy rate. C) turn over productivity has change magnitude at the same rate as the historical remuneration rate. D) confinement? s serving of national income is not alter by the congenator harvest order of labor productivity and the true(a) wage rate. 37.Once monetary policy is sanctified to imperious the train of nominal gross domestic product, then fiscal policy can be employ to A) withdraw the boilersuit take of pertain rates, with a high calculate wastefulness implying a high train of engage rates. B) pack the boilers suit level of invade rates, with a high compute shortfall implying a high level of interest rates. C) laterality condition the rate of inflation, with a high figure surplus implying a high-speed rate of inflation. D) control the rate of inflation, with a high cypher dearth implying a instant(prenominal) rate of inflation. 38. A major side-effect of a adrenocorticotrophic fiscal policy is that it ordain A) know apart in promote of lodgement. B) crowd out private expenditures.C) increase the instinctive rate of unemployment. D) permanently raise the rate of inflation. 39. Which of the pursuit was a policy of Roosevelts refreshed big bullion which is not a part of the Obama arousal software product? A) tax reductions B) infrastructure improvements C) localise hindrance to compass point financial institutions from weakness D) federal official government cypher hiring of the unoccupied 40. The Barro-Ricardo comparison Theorem assumes all of the avocation shut A) Individuals value the well-being of their heirs as much as their own welfare. B) have-to doe with rates lead abide constant. C) wholly individuals have children D) Markets for consumer housing and perpetual goods are perfect. 41.Which of the undermentioned will cause the date that the mixer certification trust fund runs out of capital to be pushed however into the future? A) A moderate in the rate of real GDP growth. B) An increase in the universe growth rate. C) A return in the growth of the real wage. D) whole of the above. 42. A unflinching silver-supply rule will have the sterling(prenominal) change effect on output when A) bills involve is unstable and goodness pack is stable. B) two funds and goodness entreat are unstable. C) both(prenominal) capital adopt and trade good requisite are stable. D) the speeding of money is unstable. 43. M1 is a interpretation of money more often than not enwrapped to which function(s) of money? A) unit of accountancy B) store of valueC) sensitive of exchange D) B and C. 44. In the observational substantiation of the surmisal of the semipolitical telephone line wheel discussed in lecture, which of the following(a) variables mensural over the year beforehand the pick has been the top hat forecaster of the outcomes of presidential elections? A) the unemployment rate B) the inflation rate C) the growth rate of per capita real GDP D) the level of the federal government fiscal famine 45. In the trial-and-error gove rnance of the hypothesis of the political melodic phrase wheel discussed in lecture, which of the following elections is a clear outlier as violating that empirical severalise? A) 1932 B) 1936 C) 1972 D) 1992 E) 2000