Macroeconomics Test [U4~U6]

YEAR__________NUMBER__________NAME__________ NOTE__________

Open-economy IS-LM Model: Y = C(Y + I(Y, i) + G + NX(Y, Y*, E) and M/P = Y with M for currency. T) L(i) Open-economy AS-AD Model: P = Pe + F(u, z) with u = un as P = Pe and Y = AD(e, M, G, T, z) with e (1 ) EP*/P. Both models assume that the uncovered interest parity, i = i* + (Ee E)/E, and the Marshall-Lerner condition hold. Part A Translate the following economic terms into either Chinese or English. [40%]
()

Force of Compounding
()

Infrastructure

Devaluation

Automatic Stabilizer

Liquidity Trap
()

Property Right
Current Account (3)

On-the-job Training
Open Market Operation (6)

Purchasing Power Parity

Convergence (2)

Creative Destruction
Seignorage (3)

Trough
Money Illusion (4)

Crawling Peg (6)

Fine Tuning (2)

Patent (2)

//
Deflation (2)

Volatility (2)

Part B Analyze the following. [60%] 1~8; 9~10(); 11~15 1. A. Development economics studies the role of institutions in growth. B. Global capital exceeds its gold-rule level. C. Convergence is a worldwide phenomenon. D. Higher saving leads to a higher steady-state growth rate for Y/AN. 2. A. The LM curve turns vertical as Y is extremely low. B. The LM curve is steeper as expectations affect spending. C. The Phillips curve is vertical. D. Money demand is perfectly elastic as i = 0. E. Deflation shifts down the IS curve. 3. A. Adaptive expectations are forward-looking. B. Rational expectations assume perfect knowledge for everybody. C. Changes in todayi significantly affect the decision on I. D. Physical capital depreciates faster than human capital. s 4. A. T credits to I abroad raise the local wage gap. B. The Laffer curve indicates that T revenue rises with the T rate. C. Changes in T affect Y as Ricardian Equivalence holds. D. T on all ATM transactions changes both M1 and M2. 5. A. Under E, monetary expansion is required with a rise in i*. B. Under E, monetary contraction reduces short-run NX. C. Inflation gradually rises with a fall in indirect E. D. Inflation is lower as the central bank is more time-consistent. 6. A. Current Account > NX B. Official Deficit > Inflation-adjusted Deficit > Cyclically Adjusted Deficit C. Steady-state Investment = Saving = Depreciation D. Optimal Inflation Rate > 0 E. Output Gap > 0 as un > 0 7. Which holds in the medium/long run? A. Paradox of Saving B. J-curve C. Fisher Effect D. Political Business Cycle 8. Which is not a G8 country? A. US B. UK C. France D. Russia E. Australia F. Japan 9. Which are expressed in stocks? A. NPV B. Deflation C. Steady State D. M1 E. Capital Depreciation F. Recession 10. A. Export > GDP B. Public Debt > GDP C. GDP at PPP > GDP at E D. GNP > GDP E. Real GDP > Nominal GDP 11. The tax rate for interest income is _____% as the inflation rate, r, and after-tax r are respectively 3%, 2%, and 1%. 12. World NX equals x. With a constant growth at y% for Y, ln(Y) against time is a 45-degree line. China has balanced growth. Its GDP grows at z% given that N falls by 1% and technology progresses by 3%. Then (x = _____. y)/z 13. For a given year, output per capita = $400, output per hour worked = $10, and the employed accounts for 50% of total population. Then an employed person works in average ____ hours in the year. 14. A 100-yen toy is correctly priced in Tokyo. Under PPP, TWD is over-(+)/under-( )valued by _____% against JPY as JPY/TWD = 1/3 and the same toy costs NTD 39 in Taichung. 15. Under the covered interest parity, the 6-month forward USD/EUR is x as EUR/USD is currently 0.8 and the 6-month interest rate is respectively 5.25% in the US and 1.25% in the euro area. Then 100= _____. x

1 A

2 D

3 D

4 A

5 D

6 D

7 C

8 E

9 ACD

10
ABCDE

11 20

12 50

13 80

14 17

15 120