F2010Final Problems VersionA

F2010Final Problems VersionA - first initial of last name...

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first initial of last name: ECO 320L Fall 2010 Professor Beatrix Paal Final Exam -- Problems name: 12/8/2010 6 problems = 80 points + 4 points extra credit total "The core values of The University of Texas at Austin are learning, discovery, freedom, leadership, individual opportunity, and responsibility. Each member of the University is expected to uphold these values through integrity, honesty, trust, fairness, and respect towards peers and community." Version A Page 1
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1. (_____ of 6 points) Real GDP in the US, measured in year 2000 (chained) dollars, was $8.03 trillion in 1995. In ten years, by 2005, real GDP rose to $11.05 trillion. a. (_____ of 2 points) Calculate the average annual growth rate of real GDP in the U.S. during the decade 1995-2005. b. (_____ of 2 points) What will real GDP be in 2015, if the growth trend of the 1995-2005 decade continues through 2005-2015? c. (_____ of 2 points) Using 2005 as the base year with value of 100, calculate an index of real GDP for 1995. Version A Page 2
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2. (_____ of 7 points) The home country has a GDP of $190. Some of the country’s citizens receive wages from abroad in the total amount of $10. The country employs no foreign factors of production. Its trade deficit is $20 and its government runs a budget deficit of $40. Tax collection by the government exactly covers transfer payments and the interest on the national debt. Private saving is 30% of private disposable income. (HINTS: Recall the definitions of private disposable income as GNP – T + TR + INT and net government income as T – TR – INT. Remember also that saving of both the private sector and the government sector is generally defined as current income minus current consumption.) a. (_____ of 3 points) Calculate GNP and the current account balance. b. (_____ of 2 points) How much is private disposable income and private saving? c. (_____ of 2 points) How much investment in physical assets can the country finance? Version A Page 3
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3. (_____ of 4 points and 4 points extra credit) A household gets utility from c , c f , l , and l f , where these variables denote current and future consumption, and current and future leisure, respectively. The household has h hours available to allocate between working and leisure both in the current and the future period and it has initial real assets of a . In addition, the real wage rate in the current and future period is denoted by w , w f , and the real interest rate is r . Under these assumptions, the household's problem can be written as ,, , max ( , , ) s. t. 11 1 ff cc ll f f ucc ll cw l w h l a w h rr r  a. (_____ of 4 points) What are the household's choice variables in this problem? What does the household take as given? b. (_____ of 2 points extra credit) What is the relative price of future leisure in terms of current consumption? A) 1 f w r B) f w C) 1 r D) 1 f r w c. (_____ of 2 points extra credit) Explain in words what this budget constraint means.
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This note was uploaded on 06/09/2011 for the course ECON 320 taught by Professor Azzamonti during the Spring '08 term at University of Texas.

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F2010Final Problems VersionA - first initial of last name...

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