makroekonomija pitanja

SVI ISPITI IZ ŠKOLSKE GODINE 0304

Ivo BiæaniæFull professor Faculty of Economics, University of ZagrebRecurrent visiting professor Central European University, BudapestJurica Šimurinaassistent, Faculty of Economics, University of Zagreb

MACROECONOMICS 2003-2004(ENGLISH TEACHING PROGRAM):FINAL EXAM, 6/7/2004

Exam structureFirst part: Test. THE TEST HAS BEEN LEFT OUT FOR THIS GENERATION The test has 120 questions divided into five kinds of questions (multiple choice, yes/no, graph analysis and numerical problems). The answers are written into a separate sheet which is handed in on completion. The time is 60 minutes (30 seconds per question). Second part: closed book essay: In this part of the exam the student answers three types of questions: 'short' answers, 'long' answers and definitions. The time allowed for this part of the exam is 160 minutes (15 minutes for each long question, 10 minutes for each short one and 5 for each definition.Third part: take home essay: The student is oferred four groups of questions with two questions in each group. He takes the questions home andf hands in the answers next day. Each answer is worth a maximum of 20 points so the highest score in this part of the exam is 80 points..Fourth part of the exam: oral exam: As a rule there will be no oral exam but is the grades in the three written sections vary a lot then the examiner resderves the right to call the student for an oral exam. If the student cosniders he has been badly marked he can demand an oral exam.

GradingEach part of the written exam is independently graded by Ivo Biæaniæ and Jurica Šimurina and the grades are later discussed.Test gradingEach correct answer is worth 1 pojnt and each incorrect, except the first four, is worth -0.25 points, blank answers are worht 0 points. Grades: 2: 70-85 points, 3: 86-99 points, 4: 100-111 points and 5: 112-120 points. Second part: closed book essayTo pass the student must get at least half the points in every group of answers, i.e. must provide at least a positive answer in every group. Two half answers in a group do not count since points are given only for individual answers. If two answeres are oferred in one group the examiner grades only one. A maximum in this part is 180 points (eight short answers 10 points each and maximum of 80 points, four long answrs 20 points each a maximum of 80 points and four definitions 5 points each and a maximum of 20 points). Grading: 2: 100-129 points, 3: 130-149 points, 4: 150-164 points and 5: 165-180 points, Take home essayTo pass the student must get at least half the points in every group of answers, i.e. must provide at least a positive answer in every group. Two half answers in a group do not count since points are given only for individual answers. If two answeres are oferred in one group the examiner grades only one. A maximum in this part is 80 points (20 points each a maximum of 80 points. Grading: 2: 45-54 points, 3: 55-64 points, 4: 65.71 points and 5: 72-80 points.Final gradeThe aggregate grade is derived as a weighted average of the three written parts with the weight given as follows: closed book essay: 0.6 and take

home essays 0.4. In case of an oral exam the final grade is determined after the oral exam.

FIRST PART: TEST: THE TEST HAS BEEN LEFT OUT FOR THIS GENERATION

SECOND PART: CLOSED BOOK ESSAY TYPE QUESTIONS

In this part of the exam the student answers three types of questions: 'short' answers, 'long' answers and definitions. The time allowed for this part of the exam is 160 minutes (15 minutes for each long question, 10 minutes for each short one and 5 for each definition.

SHORT ANSWERSThe first type requires short answers of up to half a page. There are eight grups of questions with two questions in each group. The student chooses one question from each group (in case two are oferred the examiner grades only one), each answer is worth up to 10 points sop a maximum of 80 points can be awarded in this groups. Four groups are set by Ivo Biæaniæ and four by Jurica Šimurina.

Group 1 (Questions set by Jurica Šimurina)The IS-LM, AD-AS curves, closed and open economy, with expectations

1. D.

2. W

Group 2 (Questions set by Ivo Biæaniæ)The Phillips curve, with expectations

3. Why equating the expeceted rate of inflation to last periods rate of inflation does not imply rational expectations.

4. Explain how a shift in the AD curve leads to ashioft in the AS curve.

Group 3 (Questions set by Jurica Šimurina) The macro general equilibrium, open economy, with expectations

5. E

6. C.

Group 4 (Questions set by Ivo Biæaniæ)The long run

7. Using graphs explain under what assumtiopns the 'Ludists' could be right.

8. Explain the medium and ong term effects on the griowqth rate of a rise in the rate of savings.

Group 5 (Questions set by Jurica Šimurina) Expectations

9. E

10. W

Group 6 (Questions set by Ivo Biæaniæ)

The open economy

11. How does the inclusion of trade influence the steepness of the IS curve?

12. Explain the constraints impossed by perfect capital moblity on the interest rate.

Group 7 (Questions set by Jurica Šimurina)Pathologies

13.)

14. A

Group 8 (Questions set by Ivo Biæaniæ)Policy making

15. Why can the rate of inflation be interpreted as a tax rate?

16. Why should the Governor of the Central bank be conservative in the sense of, on average, being more inflation averse than the rest of the population?

LONG ANSWERSThe second type requires longer answers of up to one page. There are four groups of questions with two questions in each group. The student chooses one question from each group (in case two are offered the examiner grades only one), each answer is worth up to 20 points sop a maximum of 80 points can be awarded in this groups. Two groups are set by Ivo Biæaniæ and four by Jurica Šimurina.

Group 9 (Questions set by Jurica Šimurina)IS-LM, AS-AD, Labour market, open economy and expectations

17. E

18. D

Group 10 (Questions set by Ivo Biæaniæ)General macro equilibrium and comparative statics, policy

19. Why should the Governor of the Central bank race about unemployment?

20. Discuss the neutrality of money and its importance for policy makers?

Group 11 (Questions set by Jurica Šimurina) The long run

21. E.

22. D

Group 12 (Questions set by Ivo Biæaniæ)The open economy and expectations

23. Derive and explain the conditions under which a restrictive fiscal policy need not lead to a recession in the short run and an expansion in th elong run?

24. Discuss the importance of the 'three deficits' as a policy constraint.

DEFINITIONSThe third type are definitions requiring a maximum 5 lines. Four groups of three terms are given and the student chooses to provide the definition of one term from each group. Each definition is worth at most 5 points so a maximum of 20 points can be given for this type of questions. Two sets of definitions are set by Ivo Biæaniæa and two by Jurica Šimurina.

GROUP 1 GROUP 2a) high powerred money e) structural changeb) velocity of money f) creative destructionc) monetary base g) skill-based technological progressd) reserve ratio h) steady state

GROUP 3 GROUP 4i) m) j) n) k) o) l) p)

THIRD PART: TAKE HOME ESSAY

The student is offered four groups of questions with two questions in each group. He takes the questions home and hands in the answers next day. Each answer is worth a maximum of 20 points so the highest score in this part of the exam is 80 points. Answers to the take home essay must be handed in by Tuesday, 30/3/2004 by 16 hours at the reception in the mailbox of Jurica Šimurina.

GROUP 1 (Questions set by Ivo Biæaniæ)

1. In terms of the Keynesian cross, IS-LM, AD-AS and price&wage setting curves in an open economy with expectations design a policy package aimed at reducing the natural level of unemplyoment and discuss the credibility implications of your policy design.

2. Explain the implications for an open economy when it changes from a fixed to a floating exchange rate regime.

GROUP 2 (Questions set by Jurica Šimurina)

3. H

3. D


5. In terms of the Keynesian cross, IS-LM, AD-AS and price&wage setting curves in an open economy with expectations explain the implications and sustainability of an external disequilibrium and internal equilibrium characterized by a large governement deficit and the medium term dynamic if no policy package is implemented.

6. How would you analize the economic effects of EU membership in terms of the Keynesian cross, IS-LM, AD-AS and price&wage setting curves in an open economy with expectations for an economy with a high natural rate of unemployment, large trade and governement deficit..


7. D

8. E




GradingEach part of the written exam is independently graded by Ivo Biæaniæ and Jurica Šimurina and the grades are later discussed.Test gradingEach correct answer is worth 1 pojnt and each incorrect, except the first four, is worth -0.25 points, blank answers are worht 0 points. Grades: 2: 70-85 points, 3: 86-99 points, 4: 100-111 points and 5: 112-120 points. Second part: closed book essayTo pass the student must get at least half the points in every group of answers, i.e. must provide at least a positive answer in every group. Two half answers in a group do not count since points are given only for individual answers. If two answeres are oferred in one group the examiner grades only one. A maximum in this part is 180 points (eight short answers 10 points each and maximum of 80 points, four long answrs 20 points each a maximum of 80 points and four definitions 5 points each and a maximum of 20 points). Grading: 2: 100-129 points, 3: 130-149 points, 4: 150-164 points and 5: 165-180 points, Take home essayTo pass the student must get at least half the points in every group of answers, i.e. must provide at least a positive answer in every group. Two half answers in a group do not count since points are given only for individual answers. If two answeres are oferred in one group the examiner grades only one. A maximum in this part is 80 points (20 points each a maximum of 80 points. Grading: 2: 45-54 points, 3: 55-64 points, 4: 65.71 points and 5: 72-80 points.

Final gradeThe aggregate grade is derived as a weighted average of the three written parts with the weight given as follows: closed book essay: 0.6 and take home essays 0.4. In case of an oral exam the final grade is determined after the oral exam.






1. D.

2. W


3. Explain the advantages of using rational expectation and why they are not used in deriving the Phillips curve..

4. Explain the meaning of the technology parameter 'A' used in deriving the price deterninastion curve and what additionla assumpions are made in deriving the curve..


5.

6. C.


7. Why the increase in production cannot rely only on the accumulation of the factors of production (especially capital)?

8. Explain the main features of the endogenous growth approach to growth models and understanding growth.


9. E

10. W

Group 6 (Questions set by Ivo Biæaniæ)The open economy

11. What are the determinants of the long run exchange rate?

12. Derive the interest parity condition and discuss the assumpionts used in deriving this relationship.


13.)

14. A

Group 8 (Questions set by Ivo Biæaniæ)Policy making

15. List the costs of inflation and briefly discuss one of your choice.

16. Explain the policy implications of seignorage.



17. E

18. D


19. Explain how a restrictive fiscal policy can lead to growth (i.e. an increase in GDP, i.e. have an expansionary effect) and discuss the credibilityx of the necessary assumptions.

20. Discuss comparative statics of a one period increase of the money supply and under what conditions this need can lead to inflation.


21. E.

22. D


23. Derive, analize and discuss the policy implications of the relationship between the 'three deficits'.

24. Derive and explain the implications of a falling yield curve and construct a chasnge which could reverse the slope of the yield curve.

DEFINITIONSThe third type are definitions requiring a maximum 5 lines. Four groups of three terms are given and the student chooses to provide the definition of one term from each group. Each definition is worth at most 5 points so a maximum of 20 points can be given for this type of questions. Two sets of definitions are set by Ivo Biæaniæ and two by Jurica Šimurina.

GROUP 1 GROUP 2a) e) b) f) c) g)d) h)



The student is offered four groups of questions with two questions in each group. He takes the questions home and hands in the answers next day. Each answer is worth a maximum of 20 points so the highest score in this part of the exam is 80 points. Answers to the take home essay must be handed in by Wednesday, 8/9/2004 by 16 hours at the reception in the mailbox of Jurica Šimurina.


1. In terms of the Keynesian cross, IS-LM, AD-AS and price&wage setting curves in an open economy with expectations design a policy package aimed at reducing the trade deficit and discuss the probable consequences of your policy design on the rate of unemployment..

2. Explain the implications for an open economy when it continues running a large fiscal deficit over a long period.


3. H

3. D


5. Why is the general equilibrium IS-LM of an open economy with expectations derived in the textbook a rational expectations model, why cannot 'naive' expectations be used in the model and discuss its advantages of this models over those without expecations.

6. How would you analize the economic effects of EU membership in terms of the Keynesian cross, IS-LM, AD-AS and price&wage setting curves in an open economy with expectations for an economy with a high natural rate of unemployment, large trade and governement deficit.


7. D

8. EIvo BiæaniæFull professor Faculty of Economics, University of ZagrebRecurrent visiting professor Central European University, BudapestJurica Šimurinaassistent, Faculty of Economics, University of Zagreb



GradingEach part of the written exam is independently graded by Ivo Biæaniæ and Jurica Šimurina and the grades are later discussed.Test gradingEach correct answer is worth 1 pojnt and each incorrect, except the first four, is worth -0.25 points, blank answers are worht 0 points. Grades: 2: 70-85 points, 3: 86-99 points, 4: 100-111 points and 5: 112-120 points. Second part: closed book essayTo pass the student must get at least half the points in every group of answers, i.e. must provide at least a positive answer in every group. Two half answers in a group do not count since points are given only for individual answers. If two answeres are oferred in one group the examiner grades only one. A maximum in this part is 180 points (eight short answers 10 points each and maximum of 80 points, four long answrs 20 points each a maximum of 80 points and four definitions 5 points each and a maximum of 20 points). Grading: 2: 100-129 points, 3: 130-149 points, 4: 150-164 points and 5: 165-180 points, Take home essayTo pass the student must get at least half the points in every group of answers, i.e. must provide at least a positive answer in every group. Two half answers in a group do not count since points are given only for

individual answers. If two answeres are oferred in one group the examiner grades only one. A maximum in this part is 80 points (20 points each a maximum of 80 points. Grading: 2: 45-54 points, 3: 55-64 points, 4: 65.71 points and 5: 72-80 points.Final gradeThe aggregate grade is derived as a weighted average of the three written parts with the weight given as follows: closed book essay: 0.6 and take home essays 0.4. In case of an oral exam the final grade is determined after the oral exam.





Group 1 (Questions set by Ivo Biæaniæ)The IS-LM, AD-AS curves, closed and open economy, with expectations

1. Derive the shift of the IS curve from shifts in the Keynesian cross.

2. Why is the LM curve in a closed and open economy the same

Group 2 (Questions set by Jurica Šimurina)The Phillips curve, with expectations

3. The Philips curve implies that when unemployment is high, inflation is low and vice versa. Therefore, we may experience either high inflation or high unemployment, but we will never experience both together. Discuss.

4. What are the effects of indexation of wages?

Group 3 (Questions set by Ivo Biæaniæ) The macro general equilibrium, open economy, with expectations

5. How does a change in expected inflation influence the current macroeconomic equilibrium?

6. Compare the equilibriums generated in a open economy with fixed and flexible exchange rates after a the introduction of a restrictive fiscal policy.

Group 4 (Questions set by Jurica Šimurina)The long run

7. On a log scale, a variable that increases at 5% a year will move along an upward sloping line, with a slope of 0.05. If true explain why, if false explain why.

8. How do the appropriability and fertility of research affect the amount of R&D spending?

Group 5 (Questions set by Ivo Biæaniæ) Expectations

9. Explain the meaning and justify the use of 'adaptive' expectations.

10. What are the implications of a falling yield curve?

Group 6 (Questions set by Jurica Šimurina)The open economy

11. If financial investors expect the dollar to depreciate vis-a-vis the yen over the coming year, explain what will happen with one-year interest rates?

12. Explain the hard peg and dollarization.

Group 7 (Questions set by Ivo Biæaniæ)Pathologies

13. Explain how an increase in primary money (expansive monetary policy) can lead to a fall in the money supply (the case of the Detression)

14. Define seigniorage and explain why there is a maximum level of seigniorage.

Group 8 (Questions set by Jurica Šimurina)Policy making

15. Explain the problem of "time consistency".

16. How would target ranges for money growth affect usefulness of monetary policy?


Group 9 (Questions set by Ivo Biæaniæ)IS-LM, AS-AD, Labour market, open economy and expectations

17. Explain the difference of the multiplier in the Keynesian cross and IS-LM model and discuss the importance and policy implications of 'crowding out'.

18. Discuss why the expectations augmented IS-LM model presented in the textbook in chapter 17 can be considered an rational expectations macroeconomic general equilibrium model and this extension influences the usage value of the model

Group 10 (Questions set by Jurica Šimurina)General macro equilibrium and comparative statics, policy

19. Explain the effect of long-term unemployment on inflation.

20. What needs to be done to end hyperinflation?

Group 11 (Questions set by Ivo Biæaniæ) The long run

21. Explain why the natural rate of unemployment is not influenced by technological progress and discuss what consequences it can have.

22. Discuss the importance of 'well behaved production functions' for steady state growth.

Group 12 (Questions set by Jurica Šimurina)The open economy and expectations

23. Using the IS-LM model, determine the impact of an unexpected expansionary monetary policy with no change in fiscal policy on stock prices. (If the effect is ambiguous, explain what additional information would be needed to reach the conclusion).

24. Consider two economies, one foreign one domestic. Construct the balance of payments for each country given the following list of transactions: 1. The domestic country purchased $100 in oil from the foreign country; 2. Foreign tourists spent $50 on the domestic coast; 3. Domestic residents purchased $20 in illegal substances from foreigners; 4. Foreign investors were paid $25 in dividends from their holdings of domestic equities; 5. Domestic residents gave $35 to foreign charities; 6. Foreign investors purchased $20 in domestic junk bonds.


GROUP 1 GROUP 2a) Tanzi-Olivera effect e) Net National Product (NNP)b) Laffer curve f) Gross National Product (GNP)c) Taylor's rule g) Gross Domestic product (GDP)d) Ricardian equivalence h) Gross Netional Income (GNI)

GROUP 3 GROUP 4i) rational expectations m) tradeable goodsj) adaptive expectations n) real appreciationk) animal spirits o) trade-weighted real exchange ratel) backloading p) capital controls




1. Discuss the importance of backloading and design a fiscal-monetary policy mix with backloading starting from a closed economy with expectations, an unsustainable deficit and level of unemployment above the natural rate.

2. Discuss the possible consequences for an economy facing an external disequilibrium and large budget deficit, which refuses to devalue its currency and remains with a fixed exchange rate.


3. How does the credibility of a policy play a role in outcomes of policy decisions?

3. Discuss the effects of devaluation for a country with a high trade deficit and a high foreign debt.


5. Explain the reasons why the growth model developed in chapters 10-12 generates optimistic expectations about the future for economies which initially are not in on the steady state growth path.

6. Discuss the institutional framework and policy requirements, which would be conducive to a lasting increase in the rate of growth of per capita income on the steady state growth path.


7. Discuss the institutional framework and policy requirements, which would be conducive to a lasting increase in the rate of growth of per capita income on the steady state growth path.

8. Explain pros and cons of setting explicit inflation targets by a central bank without any regard for unemployment.



Exam structureFirst part: Test. THE TEST HAS BEEN LEFT OUT FOR THIS GENERATION The test has 120 questions divided into five kinds of questions (multiple choice, yes/no, graph analysis and numerical problems). The answers are written into a separate sheet which is handed in on completion. The time is 60 minutes (30 seconds per question). Second part: closed book essay: In this part of the exam the student answers three types of questions: 'short' answers, 'long' answers and definitions. The time allowed for this part of the exam is 160 minutes (15 minutes for each long question, 10 minutes for each short one and 5 for each definition.

Third part: take home essay: The student is oferred four groups of questions with two questions in each group. He takes the questions home andf hands in the answers next day. Each answer is worth a maximum of 20 points so the highest score in this part of the exam is 80 points..Fourth part of the exam: oral exam: As a rule there will be no oral exam but is the grades in the three written sections vary a lot then the examiner resderves the right to call the student for an oral exam. If the student cosniders he has been badly marked he can demand an oral exam.

GradingEach part of the written exam is independently graded by Ivo Biæaniæ and Jurica Šimurina and the grades are later discussed.Test gradingEach correct answer is worth 1 pojnt and each incorrect, except the first four, is worth -0.25 points, blank answers are worht 0 points. Grades: 2: 70-85 points, 3: 86-99 points, 4: 100-111 points and 5: 112-120 points. Second part: closed book essayTo pass the student must get at least half the points in every group of answers, i.e. must provide at least a positive answer in every group. Two half answers in a group do not count since points are given only for individual answers. If two answeres are oferred in one group the examiner grades only one. A maximum in this part is 180 points (eight short answers 10 points each and maximum of 80 points, four long answrs 20 points each a maximum of 80 points and four definitions 5 points each and a maximum of 20 points). Grading: 2: 100-129 points, 3: 130-149 points, 4: 150-164 points and 5: 165-180 points, Take home essayTo pass the student must get at least half the points in every group of answers, i.e. must provide at least a positive answer in every group. Two half answers in a group do not count since points are given only for individual answers. If two answeres are oferred in one group the examiner grades only one. A maximum in this part is 80 points (20 points each a maximum of 80 points. Grading: 2: 45-54 points, 3: 55-64 points, 4: 65.71 points and 5: 72-80 points.Final gradeThe aggregate grade is derived as a weighted average of the three written parts with the weight given as follows: closed book essay: 0.6 and take home essays 0.4. In case of an oral exam the final grade is determined after the oral exam.






1. D.

2. W


3. Explain the role of expectations in derivign the Philips curve.

4. What enters into the determination of the mark-up?


5.

6. C.


7. Derive the Golden rule of capita accumulation and explain its importance.

8. Design and explain a technlogy shoft which reduces the level of employment.


9. E

10. W

Group 6 (Questions set by Ivo Biæaniæ)The open economy

11. Why is the level of the nonimal exchange rate irrelevant for the level of net exports?

12. Derive the relationaship of the domestic and foreign real interest rate under conditons of a floating exchange ratre.


13.)

14. A

Group 8 (Questions set by Ivo Biæaniæ)

Policy making

15. List the benefits of inflation and briefly discuss one of your choice.

16. Explain the implications and requirements of a debt stabilization policy target.



17. E

18. D


19. Explain how sterilizationn is achieved, why an economy would pursue such a policy goal and the importance of sterilization.

20. Discuss comparative statics of a one period increase of the money supply and why this need not lead to inflation.


21. E.

22. D


23. Derive, analize and discuss the policy implications of the Marshall-Lerner conditons.

24. Explain how a discrepancy between an internal and external equilibrium can emerge and persist and what are the possible long term implications..


GROUP 1 GROUP 2a) e) b) f) c) g)d) h)





1. In terms of the Keynesian cross, IS-LM, AD-AS and price&wage setting curves in an open economy with expectations design a policy package aimed at reducing the natural level of unemplyoment and discuss the credibility implications of your policy design.

2. Explain the implications for an open economy when it changes from a fixed to a floating exchange rate regime.


3. H

3. D


5. In terms of the Keynesian cross, IS-LM, AD-AS and price&wage setting curves in an open economy with expectations explain the implications and sustainability of an external disequilibrium and internal equilibrium characterized by a large governement deficit and the medium term dynamic if no policy package is implemented.

6. How would you analize the economic effects of EU membership in terms of the Keynesian cross, IS-LM, AD-AS and price&wage setting curves in an open economy with expectations for an economy with a high natural rate of unemployment, large trade and governement deficit..


7. D

8. EIvo Biæaniæ

REZULTATI ISPITA IZ MAKROEKONOMIKE ODRŽANOG 15/6/2004

OcjenaPismeni ispit'Take home' esejMatuloviæ Katica11nije predalaVlašiæ Sanja332-3

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