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ECO 3202 Applied Macroeconomics – Practice Test #2a
(See Answer Key in the last page)
1. If the nominal interest rates in the United States and Canada are 8 percent and 12
percent, respectively, the real interest rates are the same, and the real exchange rate is
fixed, then the market's expectation about the number of Canadian dollars to be received
for a U.S. dollar a year from now will be that it will:
A) decrease by 8 percent.
B) decrease by 4 percent.
C) increase by 4 percent.
D) increase by 5 percent.
2. The change in capital stock per worker (
∆
k
) may be expressed as a function of
s
—the
saving ratio,
f
(
k
)—output per worker,
k
—capital per worker, and
δ
—the depreciation
rate, by the equation:
A)
∆
k
=
sf
(
k
) /
δ
k
.
B)
∆
k
=
sf
(
k
)
×
δ
k
.
C)
∆
k
=
sf
(
k
) +
δ
k
.
D)
∆
k
=
sf
(
k
) –
δ
k
.
3. The Solow growth model describes:
A) how output is determined at a point in time.
B) how output is determined with fixed amounts of capital and labor.
C) how saving, population growth, and technological change affect output over time.
D) the static allocation, production, and distribution of the economy's output.
4. The steadystate level of capital occurs when the change in the capital stock (
∆
k
) equals:
A) 0.
B) the saving rate.
C) the depreciation rate.
D) the population growth rate.
5. In the small open economy in equilibrium:
A) saving is fixed and investment is determined by the investment function and the
world interest rate.
B) investment is fixed and saving is determined by the saving function and the world
interest rate.
C) saving is fixed and investment is determined by the trade balance.
D) investment is fixed and saving is determined by the trade balance.
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6. Based on a CobbDouglas production function and perfect capital mobility, capital
should flow to economies where:
A) capital is relatively scarce.
B) capital is relatively abundant.
C) technological production capabilities are inferior.
D) labor is relatively scarce.
7. In a small open economy, starting from a position of balanced trade, if the government
increases domestic government purchases, this produces a tendency toward a trade
______ and ______ net capital outflow.
A) deficit; negative
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This note was uploaded on 12/31/2011 for the course ECO 3032 taught by Professor Danielomurgo during the Fall '11 term at FIU.
 Fall '11
 DanielOMurgo
 Interest Rates

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