Macro Midterm

Current account deficit

1) A country that imports more than it exports, what happen to the trade balance? (CK3, CC1)

Y: Total production (output), total income, total expenditure C: Consumption: spending by domestic households on final goods and services I: Investment: spending for new capital goods and inventory G: government purchase: government spending on goods and services NX: Net export: exports minus imports

2. Please give a brief description of each element in the following formula: (2.5 points) (CK1) Y = C + I + G + NX

a) Current income decrease, So consumption decreases b) Expected future income decrease, So consumption decreases c) Wealth decreases, So consumption decreases d) real interest rate for savers decreases, So consumption increases (substitution effects) 6 e) real interest rate for savers decreases, So consumption decreases (income effects) f) real interest rate for borrowers decreases, So consumption increases g) Tax decrease, So consumption decreases h) Government spending decreases, So consumption decreases

4) What are are factors affecting consumption, show what happen to consumption if the factors decrease: (CK4) (2 points)

a) The total productivity A = 6,121/((160,000^0.4)*(100^0.6)) = 3.2 b) The output Y = 2.8*(160,000^0.4)*(150^0.6) = 6,830.63

6) Use the Cobb-Douglas production function with the share of capital is 40%, given capital stock is $160 billion, labor employment 100 million, and the output is $6.121 billion. (CK2, CC1) (a) Calculate total productivity (b) If labor employment is 150 million and total productivity is 2.8, calculate output in million

a) Since absorption = C + I + G, then 2140 = 1650 + I + 70, So I = 2140 - 1720 = 420. b) Net exports = Y - absorption = 2600 - 2140 = 460.

7) Suppose an economy (Y=C+I+G+NX) has output of 2600, government spending of 70, consumption of 1650, and absorption (C+I+G) of 2140. Calculate the values of investment and net exports. (CK2, CK4, CC1, CC3)

(a) Calculate the equilibrium real interest rate Set S = I So, 2 + 100r = 11-50r 150r = 9 r = 9/150=6% (b) Calculate values of I and S I = 11 - 50*0.06 = 8 S = 2 + 100*0.06 = 8 (c) Calculate consumption. C = Y - S - G = 35 - 8 - 3 = 24 (d) Absorption = C + I + G = 24 + 8 + 3 = 35

8) In a closed economy, (CK3, CK4, CC1, CC3) S = 2 + 100r, I = 11 - 50r, Y = 35 G = 3 (a) Calculate the equilibrium real interest rate (b) Calculate values of I and S (c) Calculate consumption. (d) Calculate absorption.

d. a decrease in the real wage.

A increase in the number of workers hired by a firm could result from (CK2, CC2) a. an increase in the marginal product of labor. b. an increase in the marginal revenue product of labor. c. an increase in the real wage. d. a decrease in the real wage.

B) 2.6%

According to the data comparison from last year, output grew 6%, capital grew 2%, and labor grew 4%. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, how much did productivity grow? (CK4) A) 2.0% B) 2.6% C) 3.0% D) 3.3%

D) Y increases by less than double.

Assume that the given production function Y = A × N × (75 + K/N), where K = 1000, N = 20, and A = 10, what happens if K doubles? (CK4) A) Y is unchanged. B) Y increases by 50%. C) Y doubles. D) Y increases by less than double.

b. Only to the extent that they are provided for pay.

To what extent are homemaking and child-rearing accounted for in the government's GDP accounts? (CK1, CC2) a. Not at all b. Only to the extent that they are provided for pay. c. Only to the extent that taxes are paid on them. d. All homemaking and child-rearing are accounted for

Structural Unemployment

Unemployment that results from the time a worker needs to learn and develop new skills to enter a new, growing industry is referred to as: _____________________. (1.5 points) (CK2, CC2)

a) for private domestic investment b) for foreign lending c) for financing to government budget deficit

What are the three use of private (2 points) (CK1) a) _______________________ b) _______________________ c) _______________________

a) Frictional unemployment b) Structural unemployment c) Cyclical unemployment

What are type of unemployment? (2 points) (CK2, CC2)

a. 10.4%

What is the unemployment rate if there are 215 million people employed, 25 million people unemployed, and 35 million not in the labor force? (CK2, CC2) a. 10.4% b. 11.6% c. 16.3% d. 27.9%

d. 2.5

Suppose the economy's production function is Y = A*(K^0.3)*N^0.7). Suppose K = 500,000, N = 800,000, and A = 6. Calculate the marginal product of capital. (CK1, CK2, CC2) a. 1.0 b. 1.5 c. 2.0 d. 2.5

B) 18.02.

The GDP for Cambodia equal to 2,800 million, the capital stock is 1800 million, and the number of employees equals 10 million. The production function is Dobb Douglas production function where alpha is 0.75. Total factor productivity of the economy is approximately equal to (CK1, CK4) A) 0.09. B) 18.02. C) 4.19. D) 12.87.

b. the labor force participation rate.

The number of labor force divided by the active population equals (CK2) a. the inflation rate. b. the labor force participation rate. c. the unemployment rate. d. the misery index.

C) Decrease savings and increase consumption

The real estate market has dropped, reducing the wealth of Ms. Bopha. As a result, in the current period Ms. Bopha will: (CK3) A) Decrease consumption B) Decrease savings C) Decrease savings and increase consumption D) Decrease savings and decrease consumption

a) Product approach/ production approach/ value added approach (any one) b) Income approach c) Expenditure approach

The three approach to measure GDP: (1.5 points) (CK1) a) _______________________ b) _______________________ c) _______________________

d. value added

The value of a producer's output minus the value of the inputs it purchases from other producers is called the producer's (CK1) a. surplus b. profit c. gross products d. value added

b. increases desired national saving.

Assuming no change in the effective tax rate on capital, a decrease in the government budget deficit will reduce the current account deficit if and only if the decrease in the budget deficit (CK3, CC1) a. reduces desired national saving. b. increases desired national saving. c. reduces desired national investment. d. increases desired national investment.

b. $775

Calculate the user cost of capital of a machine that costs $5,000 and depreciates at a rate of 8%, when the nominal interest rate is 11% and the expected inflation rate is 3.5%. (CK2, CC2) a. $575 b. $775 c. $950 d. $5000

B) shift the production function down and decrease marginal products at every level of employment.

CoVid-19 affect low production of Cambodian economy would (CK1, CK4) A) shift the production function up and decrease marginal products at every level of employment. B) shift the production function down and decrease marginal products at every level of employment. 1 C) shift the production function down and increase marginal products at every level of employment. D) shift the production function up and increase marginal products at every level of employment.

C) for Dara, the substitution effect is less than the income effect.

If Dara's wage rate falls, he decides to work more hours. From this, we can infer that (CK2) A) for Dara, the substitution effect is greater than the income effect. B) for Dara, the substitution effect is equal to the income effect. C) for Dara, the substitution effect is less than the income effect. D) Dara is confused.

c. 20%

If the price index last year was 2.0 and today it is 2.4, what is the inflation rate over this period? (CC2) a. -4% b. 4% c. 20% d. 40%

C) fall; remain unchanged

If there is an increase in the future marginal product of capital in a small open economy, it causes the current account to ________ and saving to ________. (CK3) A) fall; rise B) rise; remain unchanged C) fall; remain unchanged D) rise; rise

increase

In a small open economy, what will happen to the interest rate if productivity in the country increases? (1.5 points)

c. ratio of change in output to change in employment.

Marginal labor productivity is the (CK2) a. amount of workers per machine. b. amount of machines per worker. c. ratio of change in output to change in employment. d. amount of output per worker.

A) Increase his savings rate

Mr. Vibol owes the bank a lot of money on a floating rate loan (an interest rate that goes up and down according to the current market interest rates). If market interest rates increase, Mr. Vibol will: (CK3) A) Increase his savings rate B) Decrease his savings rate C) Maybe increase or decrease his savings rate D) No change

a. 37%

Nominal personal consumption expenditures in the United States were $1760.4 billion in 1980 and rose to $3839.3 billion in 1990. The price index for personal consumption expenditures was 58.5 for 1980 and 92.9 for 1990, where 1992 was the base year. Calculate the percent change in real personal consumption expenditures (rounded to the nearest percentage point) in the decade. (CK3, CC2) a. 37% b. 59% c. 118% d. 137%

1. Investment 2. Government Budget Deficit 3. Current Account Balance

Please list the three uses of saving as per macroeconomics: (1.5 points) (CK3) 1._________________________________ 2._________________________________ 3._________________________________

D) increase both current consumption and future consumption.

Sovann has just left his brother $2000. The most likely response is for his brother to (CK3) A) increase current consumption, but not future consumption. B) decrease current consumption, but increase future consumption. C) increase future consumption, but not current consumption. D) increase both current consumption and future consumption.

d. $4 billion.

Suppose output is $35 billion, government purchases are $10 billion, desired consumption is $15 billion, and desired investment is $6 billion. Net foreign lending would be equal to (CK3, CC2) a. -$4 billion. b. -$2 billion. c. $2 billion. d. $4 billion.

C) 5200.

Suppose the current level of output is 5000 and the elasticity of output with respect to capital is 0.4. A 10% increase in capital would increase the current level of output to (CK4) A) 5020. B) 5050. C) 5200. D) 5500.