PracS08 - Practice for Final 2 Math[40 pts a Index...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Practice for Final 2. Math [40 pts] a. Index numbers (5 pts). Given the following data for a representative market basket: Good u00 u01 u02 p00 p01 p02 A 10 15 20 2.0 3.0 4.0 B 10 12 10 1.0 2.0 4.0 C 10 15 20 2.0 3.0 4.0 11. What is the sPI(02,01) for weights u01? Ans ___ 13. sPI(02,01) for weights u02? Ans ___ 15. wPI([01,02],{02,01})7 Ans ___ centerlineWORK SPACE Given the following date: Year 2000 2002 Norninal GDP 7.5T Real GDP 5.0T 12T GDP deflator 125 17. GDP deflator in 2000? Ans ___ 19. What is the nominal GDP in 2002? Ans ___ c. Macro Model 1: [10 points] 1. Given two equation dynamic model: Equations: (1) Yt : Ct + It (2) Ct : a + bYt_1 with values a : 600 b : 1/2 and I0 : 1000: Suppose the economy is in equilibrium initially. 21)Equilibrium Y0? : Ans ___ Suppose I increases from 1000 to 1100 in period 1( and remains at 1100 for all subsequent periods). 23) Y1 : Ans ___ 26) Y2 : Ans ___ 27) Final equilibrium YOO? : Ans ___ 11. Consider two equation model. Variables: C consumption, Y real GNP, I Investment, C government expenditures, T Taxes (Revenues), and a, I) known coefficients Equations: (1) Y : C + I+ C and (2) C : a + [9(Y — T) Given values: a : 1000 b : 4/5 I : 1000, C I 1000 and T I 1000 28) What is the equilibrium Y7 Ans ___ If I decreases from 1000 to 960, how much would the government have to raise C to maintain the same equilibrium Y? 30) AC: Ans ___ If a decreases from 1000 to 960, how much would the government have to lower T to maintain the same equilibrium Y? 33) AT : Ans ___ 11. Math and Policy Section: SHOW ALL WORK” Page 2 Name: A. Banking (15 points + 5 bonus point) 9 To expand the money supply the FED should: a. Raise the discount rate c. Buy government securities from banks 10 The interest rates will: a. Go down b. Go up Group Leader: b. Raise the required reserve ratio d. Sell government securities to banks c. Remain unchanged d. Can not tell 11. (1 pts) If you buy a $2000 consul with the interest rate at 15% and the interest rate falls to 5%, the value of your consul is now a. 1000 b. 2000 c. 4000 d. 6000 12. (1 pts) The FED can always effect an contraction because: a. The FED can sell government securities at a loss b. The FED can verbally convince bank presidents to call in loans c. Banks may decide not to make new loans. Assume the FED’s transaction to contract the money supply is $10M and to maximize profits the banks keep reserves down to the legal minimum. Given a very large number of standard banks whose initial position is shown below and where R is reserves, GS is government securities, L are loans, DD is demand deposits and the required reserve ratio is 10%. Questions are in the boxes and the answers are below: BANK 1 Assets Liabilities Assets Liabilities Assets Liabilities R $30M DD $300M R $ ____ __ M DD $ ____ __ M R $ Q13 belowM DD $Q14 below V1 GS 130M GS ____ __ M GS Q15 below M L 140M L ____ __ M L Q16 below M BANK 2 Assets Liabilities Assets Liabilities Assets Liabilities R $30Vl DD $300M R $___ M DD $___ M R Q17 below M DD Q18 below M GS 130Vl GS ___ M GS Q19 below M L 140Vl L ___ M L 20 Q20 below M 13. Ans ___ 14. ___ 15 ___ 16 ___ 17. ___ 18. ___ 19 ___ 20. ___ 21. The money expansion multiplier for the problem above is: a.1b.5c.8d. 10 22. In relationship to the actual money expansion multiplier the formula is: a. Always greater b. Always less c. Less in recessions d. Greater in booms 23. Suppose in the problem Bank 2 is a foreign bank in France and the contraction takes place in France. The formula for the US money expansion multilier is now: a.1b.5c.8d. 10 24. The FED is likely to maintain its independence from Congress and the President as long as it: a. Maintains support of the Banking Committe of the Senate b. Maintains support of the President c. Avoids affecting Presidential elections d. Maintains support of Wall Street e. (c and d) (2 plus 2 bonus) Assume the FED’s transaction to expand the money supply is $20M and this initial transaction takes place with a rich individual who deposits the money in his bank and to maximize profits the banks keep reserves down to the legal minimum and the required reserve ratio is 20%. Given his bank whose initial position is shown below. questions are in the boxes and answers are below. THINK, Is this like Bank 1 or Bank 2 in the regular problem: BANK 1 Assets Liabilities Assets Liabilities Assets Liabilities R $40M DD $200M R $ ____ __ M DD $ ____ __ M R Q25 below M DD Q26 belowM GS 80M GS ____ __ M GS Q27 belowM L 80M L ____ __ M L Q28 below M 25 ___ 26 ___ 27 ___ 28 ___ SHOW WORK IN MARGINS Name: Group Leader: B. lS—LM Problem (30 pts ) Answers may or may not be integer Variables: Y real GNP, G consumption, I investment, G government expenditures, T taxes, 0 interest rate, M3 supply of money, p price level, % real supply of money, a, b , [0 c, e, and f are known constants IS:1.Y:G—|—I—|—G G=a+b(Y—T) 1:10—00 IS Solved: Y:k(A—ci) wherek: 1 andAza—l—IO—l—G—bT (1—0 LM solved;% : eY — fz' Equations to spolve the lS—LM model Y —|— kci : [€14 eY — : Ms/p IS-LM Solved for Y: Y = K[A + gfl] where K = % p [Fl—T] A eqns: 1. AY = KAG 2. AI = —%AY 3. A? = f (k — K)AG. Kc 4. AY = mm + A10 + AG — bAT) Given:G= 880 T = 900 M3 = 500 a = 400 b: 3/4 [0 = 800p: 1. e = 0.25 f: 4000 c = 8000 :x k = 4 and K = 4/3 Math a) to e) Must show work choose closest answer below. 29 What is the equilibrium Y7 ___ 30 Repeat your answer to 29 31 Suppose that to reduce unemployment the government desires to raise Y by 86. What is the required AG? ___ 32 Repeat your answer to 31 33 (3 pts )If G is increased by the amount in 31 above, how much I is crowded out? Answer ___ 34 Repeat your answer to 33 35 (3 pts)Now suppose the real money supply Ms/p is increased to compensate the crowding out. What is AMS/p? Answer ___ 36 Repeat your answer to 35 37 Suppose the government in 33 used AT instead of AG and at the same time a decreased by 10 and [0 increased by 20, what is the required AT Answer ___ 38 Repeat your answer to 37 On exam: (3 pts) Draw and label IS/LM curves for above questions More advanced On exam: (4 pts)Use the IS/LM curves to explain demand pull inflation. 39 What is the resulting deficit from 31Answer ___ 40. Repeat your answer to 39 41 What would be the AG and AT to achieve a balanced budget and raise Y by 86 Answer for AT ___ 42.What is the value ofi corresponding to 31Answer ___ 43 Repeat your answer to 42 44. What is the value of C corresponding to 46Answer ___ 45. Repeat your answer to 44. 3. Multipliers Name: Given a two country world: (E Exports and H Imports) Country fl Country oz YOCZCOC__IO(+GO(+EOC—HOC Ca : aa —— [9060/06 — Ta) Ha I maYa Where Ea : Hg and Efi : Ha RESULT Yfi :Cfinjfi-I-Gfi-l-Efi—Hfi 0/3 = afi "WY/3 — Tfi) Hg 2 mfiYfi WORK SPACE ...
View Full Document

{[ snackBarMessage ]}

Page1 / 6

PracS08 - Practice for Final 2 Math[40 pts a Index...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online