Macroeconomics Answers

Assume that over a given period the price index (P) is 5, the volume of the transactions (T) is 2,000 and money supply (M) is 1,000. What is the velocity of money in this economy?

a.

10

b.

6

c.

4

d.

8.

2.Which macroeconomic model is defined below?

The productivity of labor depends on the real wage workers are paid. In such models, the real wage is set to maximize the productivity units of labor per dollar of expenditure, not to clear the labor market. For this reason, we observe on the market higher wages than its equilibrium level. This causes the involuntary unemployment problem.

a.

Simple Real Business Cycle (RBC) model

b.

Insider-outsider model

c.

Menu cost model

d.

Efficiency wage model

1. Which of the monetary policy propositions of different models are given below correctly? 

I- Similar to the early Keynesians, Modern Keynesians also believe that monetary policy should be actively adjusted to offset shocks to the economy. 

II- As their name suggests, monetarists believe that changes in the quantity of money are the dominant influence on changes in nominal income. Thus, according to the monetarists, monetary policy should be determined by discretion of policymakers, not by any rule.

a.

I only

b.

none of them

c.

II only.

2.Theory of the natural rates of unemployment and output has been firstly proposed by ……………….

a.

Lucas R.

b.

Friedman M.

c.

Keynes J.M.

d.

Smith A.

3.Which of the following models view mostly the changes in real supply-side factors as determinants of short-run fluctuations in output and employment?

a.

Keynesian models

b.

Real business cycle models

c.

New Keynesian models

d.

New classical models

2.When a consumer’s disposable income increases from 600 TL to 800 TL , her level of personal consumption expenditures increases from 350 TL to 400 TL. What is her marginal propensity to save (MPS)?

a.

0.50

b.

0.25

c.

0.75

d.

0.33.

3.Which of the following correctly fills in the three blanks in the description given below?

The speculative demand for money schedule flattens out at a very ……......…... rate of interest, showing that at these rates, there is a general expectation of capital losses on bonds that outweigh interest earnings. At this rate, increments to wealth would be held in the form of ………......……., with no further drop in the interest rate. Keynes termed this situation the .................

a.

high ; bond ; capital dilution

b.

high ; money ; capital dilution

c.

low ; bond ; liquidity trap

d.

low ; money ; liquidity trap

1. Crowding out due to government borrowing occurs when ......................

a.

lower interest rates decrease private sector investment.

b.

higher interest rates decrease private sector investment.

c.

a larger money supply increases private sector investment.

d.

lower interest rates increase private sector investment.

2.Which of the following correctly fills in the blank in the definition below?

...................... is a variable whose variability is explained by causes outside the causal model.

a.

Discrete variable

b.

Response variable

c.

Endogenous variable

d.

Exogenous variable.

3.How many of the following formulas are correct?   

w = W/P   

MPL=dY/dL

MPS= 1-MPL

MY=PT

where w: real wage, W: money wage, P: price level, Y: output, L: labor, MPL: marginal product of labor, MPS: marginal propensity to save, M: money supply, T: transactions. 

a=4

b=1

c=3

d=2

1. Which of the following is the highest liquid asset?

a.

Equipment

b.

Shares

c.

Bond

d.

Money

2.The main assumption behind .……….…….. is that the economy is populated by a group of identical individuals. The behavior of the group can then be explained in terms of the behavior of one individual, called a ………..…... agent .

a.

real business cycle models ; representative

b.

Keynessian model ; irrational

c.

Keynessian model ; individualistic

d.

real business cycle models ; rational.

3.Which of the following statements about classical and new classical models is FALSE?

a.

In the new classical model, economic agents form rational expectations.

b.

In the new classical model, economic agents do not make any mistakes in predicting the price level.

c.

In the classical model, labor suppliers even know the real wage.

d.

In the classical model, economic agents are assumed to have perfect information.

general Government Investment Private Public Enterprises Investment 1980 4.61 20.78 1981 6.89 19.66 1982 5.48 18.12 1983 3.17 17.76 1984 2.97 14.12 1985 3.10 15.06 1986 2.96 11.77 1987 2.29 13.40 1988 2.54 9.52 1989 3.24 8.80 1990 3.27 9.25 1991 4.01 10.44 1992 2.99 8.47 1993 2.51 11.96 1994 2.58 9.41 1995 2.43 10.33 1996 2.99 13.71 1997 3.20 15.60 1998 3.37 23.58 1999 3.42 18.00 2000 2.91 12.46 2001 3.68 11.62 2002 4.56 14.61 2003 4.05 17.41 2004 3.44 15.06 2005 3.05 16.58 2006 3.21 13.92 2007 2.17 11.20 2008 2.56 18.30 2009 4.03 12.17 2010 2.88 13.00 2011 3.14 14.93 2012 3.47 11.45 2013 4.87 21.09 .d) In macroeconomics, you have learnt about crowding-out hypothesis (how government investment spending crowds out private investment spending).Estimate the necessary model to examine this.Report your estimated model and discuss if crowding–out hypothesis is supported.e) Interpret the coefficient of determination.f)Based on your estimation in part d)discuss if the model is suitable for prediction purposes.

neral Government Investment Private Public Enterprises Investment 1980 4.61 20.78 1981 6.89 19.66 1982 5.48 18.12 1983 3.17 17.76 1984 2.97 14.12 1985 3.10 15.06 1986 2.96 11.77 1987 2.29 13.40 1988 2.54 9.52 1989 3.24 8.80 1990 3.27 9.25 1991 4.01 10.44 1992 2.99 8.47 1993 2.51 11.96 1994 2.58 9.41 1995 2.43 10.33 1996 2.99 13.71 1997 3.20 15.60 1998 3.37 23.58 1999 3.42 18.00 2000 2.91 12.46 2001 3.68 11.62 2002 4.56 14.61 2003 4.05 17.41 2004 3.44 15.06 2005 3.05 16.58 2006 3.21 13.92 2007 2.17 11.20 2008 2.56 18.30 2009 4.03 12.17 2010 2.88 13.00 2011 3.14 14.93 2012 3.47 11.45 2013 4.87 21.09 a) Compute the main measure of variability and identify the expenditure that is more volatile.b) Compute and interpret the correlation between General Government Investment and Private Public Enterprises Investment.c) Use an appropriate graphical tool to examine the nature of relationship between 2 series.Is a linear model suitable?

Use excel

Assume you work as an Economist for the Ministry of Sugar Exports and provided the following data on sugar exports earnings ($USD millions). Year Sugar Exports Year Sugar Exports Year Sugar Exports 1980 10048 1991 10003 2002 9954 1981 10050 1992 9998 2003 9949 1982 10046 1993 9995 2004 9944 1983 10042 1994 9990 2005 9939 1984 10040 1995 9985 2006 9934 1985 10032 1996 9980 2007 9929 1986 10034 1997 9975 1987 10026 1998 9971 1988 10021 1999 9966 1989 10013 2000 9961 1990 10008 2001 9959 a) Based on the information provided, determine the appropriate model that will fit the data well. State any assumptions you make. b) Based on your model in part a) above, forecast the sugar export earnings for the period 2008-2010.

Use excel

Assume a survey by Moodle Team collected data on average hours spent studying on moodle for 10 EC203 students before the Final Exam. Day James Peter Chris Susan Jessica Chathy Ryan Melina Eric Monday 5.48 4.82 5.19 6.22 4.70 5.07 7.42 6.84 6.91 Tuesday 6.21 5.63 5.70 3.85 5.21 5.61 9.06 6.42 6.82 Wednesday 7.15 6.57 6.64 3.79 6.15 6.55 7.66 7.08 7.15 Thursday 5.22 4.56 4.93 5.96 4.44 4.81 10.73 8.09 8.49 Friday 6.83 6.17 6.54 7.57 6.05 6.42 8.99 8.41 8.48 Saturday 8.04 7.46 7.53 9.68 7.04 7.44 10.29 9.71 9.78 Sunday 16.76 6.1 10.47 7.5 8.98 9.35 12.61 9.97 10.37 a) Based on the information above, construct an index of the average hours spent on studying by EC203 students for Tuesday onwards. Use Monday as the base period. b) Using a relevant descriptive tool, show and briefly discuss whether the 10 students are indeed spending more time studying on Moodle before the Final Exam

Suppose all customers visiting the local bank have to take a random number and wait in a line. There are 200 customers in the bank in any given day, however only 85 percent of the customers are served. The length of the time customers must wait to see a Bank Teller is uniformly distributed between 50 minutes and 4 hours. a) What is the probability that a customer would have to wait between 20 minutes and 2 hours? b) What is the probability that a customer would have to wait between 50 minutes and 3 hours? c) Compute the expected waiting time.d) Compute the standard deviation of the waiting time.