Macroeconomics Practice Exam
If Y = AK0.5. L0.5 and A, K, and L are all 100, the marginal product of capital is:
50
If income in a closed is 4,800, consumption is 3,500, government spending is 1,000, and taxes minus transfers are 800, private saving is:
500
Quantity Theory: If the money supply increases 10 percent, velocity increases 4 percent, and real gross domestic product (GDP) increases by 8 percent, the price level increases by _____ percent
6%
The market value of all final goods and services produced within an economy in a given period of time is called:
gross domestic product
If the real interest rate increases by 1 percent and the inflation rate increases by 2 percent, the nominal interest rate implied by the Fisher equation:
increases by 3 percent
If in a competitive economy, Y = AKa L1-a where A>0 and 0
increases for an increase in K
All of these are stock variables EXCEPT
the government budget deficit.
Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real gross domestic product (GDP) (in 2002 prices) in 2009 was:
$6.50
If the currency-deposit ratio equals 0.5 and the reserve-deposit ratio equals 0.1, then the money multiplier equals:
2.5
Suppose an economy produces with Y = K0.5L0.5. K=100 and the labor force is 30. There is a (real) minimum wage of 1 introduced to this otherwise competitive economy. Then employment L= _____.
25
To increase the monetary base, the Fed can:
conduct open-market purchases.
Suppose the economy is originally at a steady state where the marginal product of capital is equal to the depreciation rate. If the saving rate of the economy increases, then at the new steady state:
consumption per worker will be lower compared to the original steady state.
Assume that two countries have the same per-worker production function y = k1/2, neither has population growth nor technological progress, depreciation is 5 percent of capital in both countries, and country A saves 10 percent of output whereas country B saves 20 percent. If country A starts out with a capital-labor ratio of 4 and country B starts out with a capital-labor ratio of 2, in the long run:
country A's capital-labor ratio will be 4, whereas country B's will be 16
When an economy's capital is below the Golden Rule level, reaching the Golden Rule level:
requires initially reducing consumption to increase consumption in the future.
In a small open economy, if government spending increases, then the real exchange rate (foreign goods per domestic good):
rises, and net exports fall.
If s is the rate of job separation, f is the rate of job finding, and both rates are constant, then the steady state unemployment rate is approximately:
s/(s + f)
Assume M/P = kY, when the demand for money parameter, k, is large, the velocity of money is _____, and money is changing hands ____
small; infrequently
Prices of items included in the consumer price index (CPI) are:
weighted according to the quantity of the item purchased by the typical household.