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Midterm1F09_merged

# Midterm1F09_merged - Midterm 1 Econ 381 Prof Evans Testing...

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Unformatted text preview: Midterm 1 Econ 381, Prof. Evans Testing Center: October 7–9, 2009 INSTRUCTIONS: • Write your name and section in the upper left-hand corner of this test. • Please read each question below carefully, and respond to the questions on a separate sheet of scratch paper. You must show your work. • When finished with the test, staple your scratch paper with your answers and your work to this test when you turn it in. • You may use a testing center issued calculator. • This midterm consists of the following two sections that total 100 points possible: – Part 1: Short answer, 40 points possible – Part 2: Analytical problems, 60 points possible • Good luck. Part 1: Short answer (40 points possible, 2 points each) 1. Define macroeconomics. 2. What are the three requirements for a good macroeconomic model? 3. If the national debt is a stock, what is the corresponding flow? 4. True or False. The production function Y = K α + L 1- α exhibits constant returns to scale. 5. Glenn Beck predicted in early 2009 that the increase in the money supply M ↑ in the United States would lead to widespread inflation P ↑ . Using the quantity theory of money, what are two potential reasons why Mr. Beck might be wrong? 6. What is the approximate correlation between GDP and prices over time ρ ( Y,P ) and how does it illustrate the classical dichotomy? 7. Assume that the nominal exchange rate of euros per dollar is 0.70 e /\$ and that purchasing power parity holds. If a Big Mac costs \$3.50 in the United States, how much should it cost in Europe? 8. Does our unemployment rate data come from the Establishment Survey or does it come from the Household Survey? 9. If you hold U 5,000 (yen) in a safe deposit box, are you a borrower or a lender to Japan? Econ 381, Fall 2009, Midterm 1 Page 1 of 5 10. Define structural unemployment. 11. Circle all of the following that are causes of frictional unemployment. (a) union bargaining (b) sectoral shifts (c) minimum wage (d) imperfect information/search costs 12. Define the “crowding out” effect. 13. If nominal GDP is \$13 trillion and the GDP deflator price index is 1.2 (i.e., prices have increased 20% since the base year), what is real GDP? 14. Define the domestic real exchange rate ε h in terms of the nominal exchange rate e h and the price level of foreign goods P f and the price level of domestic goods P h . 15. Write down the equation that tells you what the value of the capital stock (per worker) will be tomorrow k t +1 as a function of the capital stock today k t , investment today i t , and the depreciation rate δ . 16. If the job separation rate is 0.04 per month and the job finding rate is 0.36 per month, what is the natural rate of unemployment (steady state unemployment rate)?...
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Midterm1F09_merged - Midterm 1 Econ 381 Prof Evans Testing...

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