Macro Examination

Deadline: 11h59 am, May 21 2022

Email: ngocthangdoan@gmail.com
SECTION A: FOR EACH OF THE FOLLOWING STATEMENTS CHOOSE THE
CORRECT ANSWER AND PROVIDE AN EXPLANATION FOR YOUR CHOICE IN NO
MORE THAN TWO LINES. (3 MARKS)
a) The value of both intermediate goods and final goods are included in GDP.
i) True
ii) False
(0.5 mark)
The value of intermediate goods is not included in GDP.

b) Which of the following is a cause of frictional unemployment?

i) the minimum wage
ii) a worker leaving a job to find one with better benefits
iii) labor unions
(0.5 mark)
c) If the inflation rate is zero, then the nominal and real interest rates are the same.
i) True
ii) False
(0.5 mark)
Real interest rate = Nominal rate – Inflation rate

d) Which of the following events can cause the Long-run aggregate supply curve to
shift:
i) Increase in consumption
ii) Increase in Government spending
iii) Introduction of a new technology that increases the productivity of workers
(0.5 mark)

e) If price of oil decreases, there could be a shift to the right of the AD curve.
i) True
ii) False
(0.5 mark)
- If the AD curve shifts to the right, then the equilibrium quantity of output and the
price level will rise.
- If the AD curve shifts to the left, then the equilibrium quantity of output and the
price level will fall.

• Increase in oil price - Aggregate-supply curve shifts left

f) In an open economy, U.S. national savings can be less than U.S. investment.
i) True

1
 iii) False
(0.5 mark)
* Closed economy:
Y–C–G=I
S=Y–C–G => S = I
Total: 3 marks

SECTION B: SHORT ANSWER QUESTIONS (5 MARKS)

1. The table below shows the data of one country in 2019 and 2020:
Year Real GDP (billions) GDP Deflator (base year 2000)

2019 $10250 150

2020 $12120 182

Required:

a) Calculate nominal GDP in 2019 and 2020?

(0.5 marks)
b) Calculate the growth rate of real GDP and GDP deflator in 2020?
(0.5 marks)
c) Calculate the growth rate of nominal GDP and compare with growth rate of real GDP.
(0.5 marks)
d) Explain the differences in part (c). Which growth rate is better to show the economic
performance of a nation? Why?
(0.5 marks)

Total: 2 marks
2.
a) Suppose that the bank has the following balance sheet. Answer the following
questions:

Assets Liabilities

Reserves: Deposits: $500

Loans:

i) If the bank keep all money as reserve, fill in the T-account. What is the change in
money supply?
(0.5 mark)

2
 ii) Suppose that Central bank’s reserve requirement is 20 percent of deposits. What
is the maximum amount that money supply could increase by the banking system?
(0.5 mark)
b) The banking system currently has $300 billion of reserves, none of which are
excess. People hold only deposits and no currency, and the reserve requirement is
20 percent. If the Central bank reduces the reserve requirement to 15 percent, then
by how much does the money supply change?
(1 mark)
Total: 2 marks
3. The nominal exchange rate is e=48 peso per USD. The price of a Big Mac is P=$3
in the U.S and is P*= 72 pesos in Philippine.
Required:
a) What is the price of a U.S Big Mac measured in pesos?
(0.5 marks)
b) Calculate the real exchange rate measured as Filipino Big Mac per U.S. Big Mac?
(0.5 marks)

Total: 1 mark

SECTION C: SHORT ESSAY QUESTIONS (2 MARKS)

Bad weather in farm states destroys some crops, driving up the cost of producing food
products. What will happen to output, price level and unemployment in short run?
Total: 2 marks

If the cost of producing food products increased, output decreases, price level increases
and unemployment increases in the short run.