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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
(10:0010:50 AM class)
Section 3:
DACUS
Section 4:
MILLER
Section 5:
GUGL
(9:009:50 AM class)
This is a closedbook, closednotes 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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View Full Document 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?
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 catchup line with a welllabeled graph.
Does the catchup 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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View Full Document 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.
 Spring '08
 na

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