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Examenes Macro 2018, 2019, Exámenes de Macroeconomía

Universitat de València (UV)Macroeconomía

examenes macroeconomia grupo ara

Tipo: Exámenes

2019/2020

Subido el 22/05/2020

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MACROECONOMICS (GADEINTER). AR GROUP
January 9th, 2019
LAST NAME________________________________________FIRST NAME_________________
1. (1.5 points) Assume a closed economy. What policy mix of monetary and fiscal policy
would be needed in order to meet the following objectives:
a) Increase income (Y) while keeping the interest rate constant. Would investment
changes?
b) Decrease fiscal deficit while keeping income constant. What would happen with the
interest rate?
Use diagrams and explain your answers
2. (2 points) Assume a closed economy with the following behavioral equations:
C = 250 + 0.6 (Y – T)
I = 100 – 10 icb
G = 100; T = 50
(M/P)d = 2 Y – 40 icb
iCB = 4%
P = 2
Where Y = income in real terms; iCB = nominal interest rate in percentage terms (= 1, 3, 5,
…) controlled by the Central Bank; C = consumption; I = investment; G = public
expenditure; T = taxes; (M/P)d = demand of real balances; M = nominal quantity of money;
P = price level
a) Obtain the IS and the LM functions, and calculate the values for Y, C, and I.
b) What is the quantity of M that the Central Bank should provide in order to guarantee
its target of iCB = 4%?
c) What will be the consequences on Y; C and I of an increase of taxes up to T = 80?
Obtain the value of the taxes multiplier.
d) What should the Central Bank do with the quantity of money (M)? Would it be the
same than in section b, or should it change?
Explain you answers and use diagrams in all sections
3. (2 points) Consider an open economy with flexible exchange rates. Let UIP stand for the
uncovered interest parity condition.
a) In an IS-LM-UIP diagram, show the effect of an increase in foreign output (Y*) in
domestic output (Y) and the exchange rate (E), when the domestic central bank leaves
the policy interest rate unchanged.
b) In an IS-LM-UIP diagram, show the effect of an increase in the foreign interest rate (i*)
on domestic output (Y) and the exchange rate (E), when the domestic central bank
leaves the policy interest rate unchanged.
Use diagrams and explain your answers
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MACROECONOMICS (GADEINTER). AR GROUP

January 9th, 2019 LAST NAME________________________________________FIRST NAME_________________

1. (1.5 points) Assume a closed economy. What policy mix of monetary and fiscal policy would be needed in order to meet the following objectives: a) Increase income (Y) while keeping the interest rate constant. Would investment changes? b) Decrease fiscal deficit while keeping income constant. What would happen with the interest rate? **Use diagrams and explain your answers

  1. (2 points)** Assume a closed economy with the following behavioral equations: C = 250 + 0.6 (Y – T) I = 100 – 10 icb G = 100; T = 50 (M/P)d^ = 2 Y – 40 icb iCB^ = 4% P = 2 Where Y = income in real terms; iCB^ = nominal interest rate in percentage terms (= 1, 3, 5, …) controlled by the Central Bank; C = consumption; I = investment; G = public expenditure; T = taxes; (M/P)d^ = demand of real balances; M = nominal quantity of money; P = price level a) Obtain the IS and the LM functions, and calculate the values for Y, C, and I. b) What is the quantity of M that the Central Bank should provide in order to guarantee its target of iCB^ = 4%? c) What will be the consequences on Y; C and I of an increase of taxes up to T = 80? Obtain the value of the taxes multiplier. d) What should the Central Bank do with the quantity of money (M)? Would it be the same than in section b, or should it change? **Explain you answers and use diagrams in all sections
  2. (2 points)** Consider an open economy with flexible exchange rates. Let UIP stand for the uncovered interest parity condition. a) In an IS-LM-UIP diagram, show the effect of an increase in foreign output (Y) in domestic output (Y) and the exchange rate (E), when the domestic central bank leaves the policy interest rate unchanged. b) In an IS-LM-UIP diagram, show the effect of an increase in the foreign interest rate (i) on domestic output (Y) and the exchange rate (E), when the domestic central bank leaves the policy interest rate unchanged. Use diagrams and explain your answers
  1. (1.5 points) Assume that the Phillips curve is given by πt – πet = 15 – 3 ut , being πt and πet the actual and expected inflation rates in year t and ut de unemployment rate in t. a) Draw the short-run Phillips curve. Compute the natural rate of unemployment and explain this concept. Draw the Phillips curve in the medium-run. b) Assume that expectations are formed according to πet = 0.8 πt-1 + 0.2 πt-2. Compute the natural rate of unemployment for this economy. c) Assume that expectations are formed according to b) and that, initially, unemployment equals the natural rate and that πt = 8%. Assume, too, that in year t government decides that -from now on- it will maintain the unemployment rate 0.5 points over the natural rate for a period of 3 years. Compute the inflation rate for years t+1, t+2 and t+3. Show your results in a table. Use diagrams and explain your answers

c) Imagine that the economy is in long-term equilibrium (for 10 periods) with u (^) n = 7%, and π = 4%. Assume that the government intends to carry out an economic expansion that places unemployment at 5% for the following three years. What will happen to inflation in the periods t + l, t + 2 and t + 3? What consequences does it have for inflation to propose an unemployment target below the natural rate? Use diagrams and explain your answers MACROECONOMICS (35809) AR GROUP January 26th 2018 LAST NAME _______________________________________ FIRST NAME _________________ Please answer questions 1 to 4. Suppose the following equations describing a closed economy: C = 400 + 0,7YD I = 400 – 40 i + 0,1Y G = 250, T = 300 Ld^ = Y – 30i M s

P = 2 = constant prices Where C = consumption, I= investment, G = Government spending, T = taxes, Ld = Money demand in real terms; Ms^ = Money supply in nominal terms, YD = Disposable income. a. Find the equilibrium values for Y, i, C, I, and G and their respective income shares. b. Suppose that the fiscal authority wants to raise output by 10%. If it uses government expenditure as instrument what should the authority do? What will happen to all variables in a)? Which is the value of the fiscal multiplier in this economy? draw diagrams c. Now suppose that the Central Bank wants to offset any crowding out effect derived from this fiscal expansion by leaving the interest rate at the same level than in a). What should the CB do? Solve for the values of all variables and draw diagrams (2 points)

  1. Answer the following questions making use of equations and diagrams

a. Write the wage and price equations. Define the natural rate of unemployment. Represent the labor market equilibrium b. Obtain the aggregate supply function explaining the condition that this relation must fulfill when the unemployment rate is equal to the natural rate of unemployment. c. Which impact will have over the three equations (wage, price and aggregate supply) an increase in the price of energy? And over the natural rate of unemployment d. Assume that in order to offset the impact of the increase in energy prices on output and unemployment the government implements an expansionary fiscal policy. Which impact this measure will have on equilibrium output in the short and medium run? What about prices? (2 points)

  1. Obtain the interest rate parity condition and explain its meaning. Provide at least two reasons why European investors are not interested on investing in Brazil even though the interest rate for Brazilian bonds is 5% higher than for EU bonds (1.5 points)
  2. Write the original and the expectations augmented Phillips curve. Explain what happens with inflation when the unemployment rate is higher than the natural rate in both cases. Define the sacrifice ratio. How is the control of inflation and unemployment affected by the sacrifice ratio? (1.5 points)

unemployment, interest rates, consumption, investment and the price level. Explain the meaning of the Neutrality of Money proposition.

  1. (1 point). Suppose the domestic interest rate in EMU is i = 1% and the foreign interest rate in the USA is i* = 2%. The current nominal exchange rate is 1€=1,16 US$. a) What do you think the market is expecting about next year’s exchange rate Eet+1? b) Suppose you have 100.000€ to invest for one year and you are convinced that next year’s exchange rate is going to be 1€=1,12 US$. Where would you buy the bonds? In the US or in the EMU? c) Suppose that the Federal Reserve decides to increase i* from 2% to 3% to cool off the rapidly increasing US economy. How would you expect this to affect the strength of the dollar?