Other
Macroeconomics Practice Exam 2019 Answers
- Course
- Institution
- Book
Macroeconomics Practice Exam 2019 Answers --> questions to be found in another free downloadable document
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
Samenvatting The Economy - Economics (ECONOM01)
-
Summary microeconomics weeks 1-8
-
Summary of lecture notes and textbook
Seller
Follow
bjornlabrie
Reviews received
Content preview
Course name: Macroeconomics, the European Perspective KEYDate examination: 24 June 2019
Duration 3 hrs; from 9.00 to 12.00
Examination: end term
Total number of pages: 15
Total number of questions: 6
Question 1 – Economic fluctuations (20 points)
1a) 5 points
AD = C + I + G + X – M
Equilibrium condition: Y = AD
Y=C+I+G+X–M
Y = c0 + c (Y – T) + I + G + X – mY
Y = c0 + c Y –c T + I + G + X – mY
Y – cY + mY = c0 –c T + I + G + X
Y ( 1 – c + m) = = c0 –c T + I + G + X
Y = 1/(1-c+m) * (c0 – cT + I + G + X)
Y = 2850, multiplier = 1/(1-c+m) = 2.5
1b) 5 points
Change in investment = +200, Change in Y = multiplier * change in investment
= 200*2.5 = 500 (new equilibrium Y = 2850 + 500 = 3350 ). The value of the
multiplier is still 2.5 since neither c nor m has changed.
1c) 5 points
An automatic stabilizer dampens the fluctuations in economic activity without
direct interference by the government. In this model the only variable that
dampens fluctuations in Y are imports. If Y is larger (boom), M is larger and
since M is negatively related to Y, this leads to a mitigating effect on Y. If Y is
smaller (depression), M is smaller and Y will be affected less negatively.
Nb: all other answers lead to 0 points. Taxes and government expenditure are
exogenous in this model and thus do not act as an automatic stabilizer. To score
5 points, imports should be mentioned and there should be a sufficiently detailed
description of the mechanism by which imports dampen economic fluctuations.
Only referring to the multiplier is not enough to score full points.
, 1d) 5 points
Crucial in explaining the meaning of the paradox of thrift is mentioning the
difference between savings in an individual setting and savings in an aggregate
setting.
Saving is possible and beneficial for an individual, as long as not all individuals
save. If all individuals save, aggregate consumption will be lower, this leads to
lower aggregate demand. Lower aggregate demand leads to lower income and
lower income leads to lower aggregate saving. Therefore, if too many individuals
save, individual saving leads to lower or even negative saving on an aggregate
level.
To score full points, the difference between individual and aggregate saving
must be mentioned and explained, the mechanism by which saving by many
individuals leads to lower or negative savings must be explained and the end
result of aggregate saving (lower or negative) must be mentioned.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller bjornlabrie. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $0.00. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
66475 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now