ECON 291 Study Guide - Midterm Guide: Conditional Convergence, Marginal Product, Fiscal Policy
26 Jun 2018
School
Department
Course
Professor
Economics 291: Canadian Macroeconomic Policy
Practice Final
Total time: 2 hours 30 minutes
Name (LAST, First):
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Student Number:
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INSTRUCTIONS:
1. Don’t open the exam until instructed to do so.
2. Mark the best answer for the multiple choice questions on the MCQ answer sheet.
3. Write your answer for analytical questions in the space provided below the question.
4. Keep at least two decimal places in all calculations with non-integers.
5. Any unauthorized electronic devices must be turned off during the examination.
6. No books, notes, or unauthorized electronic devices shall be within the reach of a student during
the examination.
7. During the examination, communicating with, or purposely exposing written papers to the view of,
other examinees is forbidden.
Marking Scheme:
Multiple Choice Section Analytical Questions
/20
AQ1: / 9 AQ3: /11
AQ2: /10 AQ4: /11
Mark: _________/61
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1
MCQ Answer Sheet
Use pencil or dark pen
Fill circle fully
Erase mistakes completely
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2
1. Real GDP values current production at
A) current year prices.
B) the best estimate of next year's prices.
C) the average of price levels over the entire sample period.
D) base year prices.
2. The neoclassical theory of distribution explains the allocation of:
A) output between goods and services.
B) output among consumption, investment, and government spending.
C) income among factors of production.
D) income between saving and investment.
3. In the neoclassical model with fixed income, if there is a decrease in government spending with no
change in taxes, then public saving ______ and private saving ______.
A) increases; increases.
B) increases; does not change
C) decreases; increases
D) decreases; does not change
4. The Malthusian model predicts that
A) population will keep increasing.
B) the standard of living will keep increasing.
C) health improvements increase the standard of living.
D) population control improves the standard of living.
5. In the Solow growth model, the economy reaches a stable steady state because
A) the marginal return of capital is decreasing.
B) capital is growing at a constant rate.
C) the substitution effect is stronger than the income effect.
D) conditional convergence holds.
6. Suppose a country is much richer than the others in the Solow growth model. What happens in the
long run?
A) The other countries catch up to the rich one.
B) The rich country grows the fastest.
C) The rich country becomes poorer than the others.
D) Nothing.
7. What would cause prices to fall and output to rise in the short run?
A)
short-run aggregate supply shifts right
B)
short-run aggregate supply shifts left
C)
aggregate demand shifts right
D)
aggregate demand shifts left
8. How do open-market sales affect the price level and real GDP?
A)
They increase the price level and real GDP.
B)
They decrease the price level and real GDP.
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Document Summary
Mexico increases: the keynesian consumption function exhibits all of the following properties except that, the marginal propensity to consume is between 0 and 1. [9 marks] the economy of freedonia can be described by the solow growth model. The production function is given by = 101/32/3, where is the total output, is the amount of capital, and is the amount of labour. The capital goods depreciate at a rate of 10% per year. Each part is independent: (3 marks) suppose that the inflation rate in canada is 5%, and the inflation rate in mexico is 8%. Use purchasing power parity to predict what is likely to happen to the exchange rate between the mexican peso and the canadian dollar: (6 marks) the table below represents the balance of payments for a small economy. _______: (2 marks) explain why it is possible for a country to run a balance of payments deficit. [11 marks] miscellaneous questions about consumption and investment.
