E212ex_s03

E212ex_s03 - ECON 212 Final Exam Spring 2003 May 1st and 3rd Name Instructor(circle one Section 1 Section 2 Section 3 Section 4 Section 5 Student

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ECON 212 Final Exam, Spring 2003 May 1 st and 3 rd Name: Student ID#: Instructor (circle one): Section 1: SICKLES Section 2: GUGL (10:00-10:50 AM class) Section 3: DACUS Section 4: MILLER Section 5: GUGL (9:00-9:50 AM class) This is a closed-book, closed-notes exam. You may use a calculator. Be sure to SHOW YOUR WORK to get full credit. If a problem requires a formula, please WRITE DOWN THE FORMULA before you do your calculations. EACH OF THE 11 QUESTIONS CARRIES AN EQUAL WEIGHT . If you need more room to answer any of the questions, you may write on the back of the pages. Pledge:
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1. Consider an economy described by the following information. C = 100 + 0.75*Y d I = 1000 G = 800 X = 100 T = 0.2*Y Note that disposable income is given by Y d , and hence Y d = Y - T. a) At spending balance, what are the values of i. Gross Income (Y) ii. Consumption iii. Budget Deficit or Surplus iv. National Saving b) What is the government spending multiplier in this economy? c) Suppose the government increases spending by 200. What is the change in income generated by this action? Is there a budget deficit or surplus? d) Suppose the government wants to balance the budget at the current tax rate, that is G = 0.2*Y. Find the new spending balance. How big is the government share as a percentage of GDP now?
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2. Suppose the GDP per capita in the United States is $20,000 and GDP per capita in China is $2,500. Consider the data for the USA and China: Country Percent. Growth in K/L Percent. Growth in Technology United States China 3 18 1 .5 a) Write down the growth accounting formula. b) Calculate the growth in productivity for both the United States and China. Assume that the capital share of income in the United States is 1/3 and 1/4 in China. c) Graphically show the idea of the catch-up line with a well-labeled graph. Does the catch-up line accurately depict the results in part b)? d) If China is growing at a constant rate of 5% and the USA is growing at a constant rate of 2%, approximately how long will it take China to catch up with the United States? (You can use the rule of 72 to approximate the years it will take China to catch up with the USA.)
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3. Assume that the required reserve ratio (r) equals 0.1 and that the currency to deposit ratio (k) is 0.2. a) Suppose the Fed wants to decrease the monetary base. In which type of open market operation will the Fed engage? b)
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This note was uploaded on 04/07/2008 for the course ECON 211 taught by Professor Na during the Spring '08 term at Rice.

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E212ex_s03 - ECON 212 Final Exam Spring 2003 May 1st and 3rd Name Instructor(circle one Section 1 Section 2 Section 3 Section 4 Section 5 Student

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