I.

True or False (15%)

Explain whether the following statements are true, false, or uncertain. You can use graphs where
appropriate to support your answers. Explanation determines grade. Start your answer with one
of the three statements – “True”, “False”, or “Uncertain” and then justify your choice.

(a) If the price of eggs falls due to a serious bird u, the chicken farmers might lay o some of
their workers. (3%)
(b) In ation does not reduce the purchasing power of most workers. (3%)
(c) In ation hurts borrowers and helps lenders. (3%)
(d) If prices change in a way that leaves the overall price level unchanged, then no one is made
better or worse o (3%)
(e) If the government impose a minimum wage level, the total number of employed workers will
de nitely decrease. (3%)

II. Labor market (20%)

Consider an economy with two labor markets- one for high-skilled workers and one for low-skilled
workers. Assume that the labor supply and labor demand of each type of worker are described by
the following equations, respectively.
Ns(H ) = 5wH and Nd (H ) = 300 − wH
Ns(L) = 4wL and Nd (L) = 180 − 2wL
where N(H ), N(L), wH , wL denotes respectively represent the number of high-skilled workers,
the number of low-skilled workers, the wages of high-skilled workers and the wages of low-skilled
workers. Wage is expressed in dollars per hour, and the number of workers is expressed in
millions of workers. Suppose the wage can freely adjust to balance the demand and supply in
each market.

(a) Find the equilibrium wage and the equilibrium level of employment in each market. (4%)
(b) Assume that the government has passed a new policy that all labor markets should be
regulated by the minimum wage, which is $35 per hour. Explain how this policy a ect the
high-skilled worker market and low-skilled worker market. And Calculate the unemployment in
each market. (4%)
(c) Suppose the invention of computers, while increasing the productivity of high-skilled workers,
also reduced the value of certain tasks previously performed by low-skilled workers. What
e ect does the invention of computer have on each labor market? Please use graphs to
explain which curves change in each labor market. Be speci c about the impact of the
invention of the computer on the relative wages of high-skilled and low-skilled workers.(4%)
(d) Over the past three decades, we have witnessed technological advancements that have
continually pushed down computer prices. What e ect does the long-term decline in
computer prices have on the dynamics of relative wages? (4%)
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 (e) Suppose the wages are rigid at the level you found in part (a), what e ect does the invention
of computer have on each labor market? Please use graphs to support your answers. (4%)

III. Monetary System & Short-run Fluctuations (29%)

Suppose the Fed sets its monetary policy according to the Taylor rule, which is described by the
following equation
Y − Ȳ
FFR = FFR* + 1.5(π − π *) + 0.5( )
Ȳ
where FFR * denotes the long-term federal funds rate target, π * denotes the long-term
in ation rate target, and Ȳ denotes the long-run trend in output. In long-run equilibrium, in ation is
equal to its 2% target, actual output is equal to its trend, i.e., the output gap is zero, and the
federal funds rate is set equal to its long-term 5% target. If the demand curve for reserves is
Q=20-200R, where R is the federal funds rate and Q is the quantity of reserves (1 unit of Q
represents $1 billion).

(a) Please indicate the long-run equilibrium federal funds rate and the amount of the
corresponding reserves. (4%)
(b) Plot the demand and supply curves for reserves, with reserves on the horizontal axis and FFR
on the vertical axis. Be speci c about the shape of the supply curve. Is it elastic or inelastic,
why? (4%)
Y − Ȳ
(c) During the 2008-2009 nancial crisis, output was 5% below trend ( = − 5 % ) and
Ȳ
in ation was 1% below target. According to the Taylor's rule, what should the FFR be equal
to? (4%)
(d) According to (c), if the Fed adjusts the federal funds rate through open market operations,
how much government bonds will the Fed buy or sell from private banks? Use the gure of the
federal funds market to illustrate the e ect of this open-market operations. Be speci c about
the resulting change in the interest rate and the reserve. (4%)
(e) After the nancial crisis, the economy gradually recovered. Many US investors expect the Fed
to raise the interest rate on federal reserves. Assume that the current federal funds rate from
part (b) will remain unchanged until the end of the year. However, the market expects it to
increase by 1 percentage points year-on-year for the next four years, reaching 5% in the fth
year, and maintaining that level for the next ve years. If you imagine the next ten years as a
speci c time period, what is the average nominal interest rate per year? (4%)
(f) How does a change in the federal funds rate a ect the in ation rate? Please brie y explain
how it works. (4%)
(g) Suppose the U.S. real estate soars, and the Fed fears a housing bubble may burst. How
would you suggest the Fed revise the original version of Taylor's rule so it can deal with rising
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 house prices? Write down your proposed new Taylor rule and explain why it might be able to
ght against the rising housing price (5%)

IV. Countercyclical Policy (16%)

During the covid-19 pandemic, the economy is in recession with high unemployment and low
output. Governments and central banks around the world have adopted various scal or monetary
policies to stimulate the economy.

(a) Suppose there is downward wage rigidity in the labor market. Plot the labor market
equilibrium before and after the covid-19 pandemic to illustrate the situation described above
(4%)
(b) Suppose the government decides to stimulate the economy through tax changes. What
direction should the tax changes be? Plot the labor market to illustrate the e ect of this scal
policy. Be speci c about the change in employment before and after the scal policy. Explain
in words why the scal policy has the e ect that you have shown in the graph. (4%)
(c) Consider two policies- a 10% tax change that lasts for only one year and a 10% tax change
that is expected to be permanent, which policy will stimulate greater spending by consumers?
which policy will have the greater impact on aggregate demand? Explain (4%)
(d) Identify an open market operation that would stimulate the economy. Draw a graph similar to
the one in part (b) to show the e ect of the open-market operation on labor and the wage
level. Explain in words why the monetary policy has the e ect that you have shown in the
graph. (4%)

V. Student’s question (20%) (choose two questions from below and indicate the questions
you answered. Answering more than two questions will not be scored)

V1
直百錢是三國時期蜀漢發⾏的⼤錢之⼀，其重量約為漢代五銖錢的四倍，但官⽅宣稱其價值為⼀百

枚五銖。在《零陵先賢傳》中詳細記載了「直百錢」的由來:

初攻劉璋，備與⼠眾約：「若事定，府庫百物，孤無預焉。」及拔成都，⼠眾皆舍⼲⼽，赴諸藏競

取寶物。軍⽤不⾜，備甚憂之。巴曰：「易耳，但當鑄直百錢，平諸物賈，令吏為官巿。」備從

之，數⽉之間，府庫充實。

儘管⽂中宣稱「數⽉之間，府庫充實」，但直百錢的發⾏其實造成蜀漢地區極⼤的通貨膨脹、讓商

業⼀度退化為以物易物的型態。請思考直百錢的涵義，並回答以下問題。

(a) 請敘述為何傳統五珠錢能穩定經濟，直百錢⼜是如何造成發⾏地區嚴重的通貨膨脹?(提⽰:漢代五

銖錢的重量和⾯額是等價的) (5%)
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(b) 過去某些學者認為蜀漢賦稅輕薄、體諒⺠⽣，但近代的歷史學家卻有不同的看法，請根據直百五

銖來解釋為何某些學者認為蜀漢政府「搜刮⺠脂⺠膏」。(5%)

V2
曾經是全球排名前10的Terra原⽣代幣Luna幣，5⽉發⽣史無前例崩盤，其價格在短短3天崩瀉

99.9%。幣值從近68美元（約新台幣2,000元），暴跌⾄最低0.00027美元（約新台幣0.008元），市

值蒸發逾300億美元，也間接帶崩整個虛擬貨幣市場，包括比特幣、以太幣相繼重挫。據統計，全球

散⼾逾16萬⽤⼾出現爆倉，爆倉價值⾼達21.2億元，通通⾎本無歸。

(a) 根據課本定義貨幣應具有甚麼功能? (3%)

(b) 舉出兩項虛擬貨幣的特⾊ (4%)

(c) 當引⽂中的事件發⽣時，影響到了哪⼀項貨幣的功能?虛擬貨幣還能算是貨幣嗎? (3%)

V3
From 1987 to 2006, the housing market in the United States was booming, and house prices
nearly doubled. However, in 2006, the housing market crashed sharply, and house prices were
revised to 60% of the original value, which caused the recession of 2007-2009.

(a) Please explain how the housing market crashed in 2007-2009. (2%)
(b) Please explain how the housing market crash a ected the commodity market. (2%)
(c) Please explain how the housing market crash a ected the nancial institutions. (3%)
(d) Please explain how the housing market crash caused the recession of 2007-2009. (3%)

V4
In 2087, a global company specializing in streaming service, Net ix, took a toll on its number of
subscribers due to a controversial post written by its curator. Hence, a kind of state-of-the-art
robots, which can write posts and interact with netizens without making any error and arousing
controversies, are invented to replace curators(⼩編). While rms are happy about reducing the
cost regarding curators' salaries, the labor market have some changes…

(a) Suppose that the original labor supply (before the robots invented) was 52w + 100, if
w < 10; 620, if w ≥ 10, and labor demand was −52w + 516. What is the original
equilibrium wage and quantity? (3%)
(b) The government found that the equilibrium wage was too low and decided to protect workers,
so a minimum wage of $6 per hour is set. How many workers were unemployed? What kind of
unemployment is this? Does this kind of unemployment have a signi cant impact on
unemployment in the labor market in Taiwan?Please brie y explain how this kind of
unemployment happened and why or why not it has a signi cant impact on labor market. (4%)
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(c) Come back to now. When the robots are invented, many curators lose their jobs and take to
the streets, ercely protesting against rms and the government. Many analysts predict that
the government will be overthrown due to long time public discontent and there will be
economic recession, causing many global companies to exit local markets. What will happen
in the overall labor market in Taiwan? (3%)

V5
早在⻄漢就出現政府⼲預市場的先例: 平準法。平準法指朝廷設立的平準機構在某些物資⼤跌的時機

收購了⼤批物資，並在市場價格⼤漲時賣出，使市場價格穩定於⼀定⽔平上。

(a) 請以課堂中所學的經濟思維，解釋此法對市場帶來的影響 (5%)

(b) 平準法在歷史上並不是完全成功，千年來⼀直是朝野爭辯不休的話題。請問平準法可能有那些缺

點或限制。 (5%)

V6
回答下列問題並解釋。

(a) ⼩明是個15歲的少年，長期幫忙處理家裡麵店的事務，⼩明會被納入 potential worker嗎? (2%)

(b) 過了三年之後，⼩明考上了不錯的外地⼤學，整天忙於參與各式各樣的⼤學活動，這時候的他會

被納入potential worker嗎？如果會，他屬於employed、unemployed、還是not in labor force？

(2%)
(c) ⼜過了5年，他到⼀家公司上班，因為遇到經濟衰退的關係，⽽被辭退。請問這屬於何種失業，

並描述其失業類別的發⽣原因。(3%)

(d) 在接下來的⼀年，他去⾯試了許多的公司，卻沒有公司錄⽤他，這算是哪種失業並描述其失業類

別的發⽣原因。 (3%)
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