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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



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)

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



11 20

12 50

13 80

14 17

15 120