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Economics 301
Intermediate Macroeconomics

Review Questions

Winter 2000

Last updated: March 8, 2000

Old Final Exams

Note: These final exams are based on material in the textbook by Abel and Bernanke. Some questions are based on material not covered in Mankiw's textbook. 

Review Questions for First Midterm

Textbook web page

Here is the link for Mankiw's web page.

  1. Look at the sample essay questions and flash cards for chapters 1-4.

  2. Do the online quizzes for chapters 1-4. Enter a phony name and leave the instructor information blank.

Labor Market

For the following questions, describe what happens to the equilibrium real wage and employment (labor amount).

  1. War decimates the capital stock.

  2. Overall productivity increases due to advances in computer technology.

  3. Loose border policies with Mexico lead to a large influx of immigrants.

  4. Men's labor force participation rate decreases.

  5. Huge amounts of new capital becomes available for production.

Goods Market

For the following questions, describe what happens to the equilibrium real interest rate and levels of saving and investment.

  1. Government spending increases to pay for military build-up.

  2. Firms become more optimistic about the future and increase their demand for investment goods.

  3. Consumers loose confidence in the economy and decide to consume less.

  4. Investment tax credits are eliminated by the government.

  5. Booming stock market increases aggregate wealth and promotes more consumption.

  6. Republicans pass huge tax cut.

Answers

Labor Market

  1. Labor demand curve shifts in lowering real wage and employment.

  2. Labor demand curve shifts out raising real wage and employment.

  3. Labor supply curve shifts out lowering real wage and raising employment.

  4. Labor supply curve shifts in raising real wage and lowering employment.

  5. Labor demand curve shifts out raising real wage and employment.

Goods Market

  1. Saving curve shifts in raising real interest rate and lowering saving and investment.

  2. Investment curve shifts out raising real interest rate and increasing saving and investment.

  3. Saving curve shifts down lowering real interest rate and increasing saving and investment.

  4. Investment curve shifts in lowering real interest rate and decreasing saving and investment.

  5. Saving curve shifts in raising real interest rate and decreasing saving and investment.

  6. Saving curve shifts in raising real interest rate and decreasing saving and investment.

Review Questions for Second Midterm

Textbook web page

Here is the link for Mankiw's web page.

  1. Look at the sample essay questions and flash cards for chapters 6,7,9,10 and 11.

  2. Do the online quizzes for chapters 6,7,9,10 and 11. Enter a phony name and leave the instructor information blank.

 

I. Curve shifting

  1. IS/LM- Short-run analysis (sticky price level). Show on the appropriate graphs what happens to the real interest rate (r) and the demand for goods and services (Y) if the following variables increase (holding everything else fixed)
    1. Government spending, G
    2. Wealth, WL (treat as exogenous consumption demand)
    3. Lump-sum taxes, T
    4. Nominal money supply, M
    5. Expected inflation, pe
    6. Expected future marginal productivity of capital (treat as exogenous investment demand)
  2. IS/LM/FE- long-run analysis (flexible price level). Assuming the labor market, asset market and goods market are initially in equilibrium, show on the appropriate graphs what happens to the long-run equilibrium values of the real interest rate (r) and potential output (Y) if the following variables increase (holding everything else fixed):
    1. Government spending, G
    2. Wealth, WL (treat as exogenous consumption)
    3. Lump-sum taxes, T
    4. Nominal money supply, M
    5. Expected inflation, pe
    6. Expected future marginal productivity of capital (tread as exogenous investment)
  3. Aggregate Demand (AD). Indicate whether the AD curve shift up and right (increase in AD) or down and left (decrease in AD) if the following variables increase (holding everything else fixed)
    1. Prices, P
    2. Government spending, G
    3. Productivity, A
    4. Capital stock, K
    5. Wealth, WL (treat as exogenous consumption)
    6. Lump-sum taxes, T
    7. Expected future income, Ye
    8. Nominal money supply, M
    9. Expected inflation, pe
    10. Expected future marginal productivity of capital
  4. AD/AS - Long-Run analysis. Assume perfectly flexible prices and wages. Assuming the labor market, asset market and goods market are initially in equilibrium, show on the appropriate graphs what happens to the long-run equilibrium values of the general price level (P) and potential output (Y) if the following variables increase (holding everything else fixed):
    1. Government spending, G
    2. Productivity, A
    3. Capital stock, K
    4. Wealth, WL
    5. Lump-sum taxes, T
    6. Nominal money supply, M
    7. Expected inflation, pe
    8. Expected future marginal productivity of capital
  5. AD/AS - Short-run analysis. Assume sticky prices and wages in the short-run. Assuming the labor market, asset market and goods market are initially in equilibrium, show on the appropriate graphs what happens to the values of the general price level (P) and output (Y) if the following variables increase (holding everything else fixed):
    1. Government spending, G
    2. Productivity, A
    3. Capital stock, K
    4. Wealth, WL
    5. Lump-sum taxes, T
    6. Nominal money supply, M
    7. Expected inflation, pe
    8. Expected future marginal productivity of capital