Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

Business Economics - ECON8069

Practice Exam Questions for the Final Exam

Part II - Semester 2, 2021

You are encouraged to attempt these questions by yourself first, and check your answers against the provided model answers. To get a HD in the exam, you will need to provide explanations as detailed as possible.

1. Evaluate the following statements and explain.

(a) Suppose a country is in the expansion part of the business cycle but the output is below it potential level. If the government has implemented an expansionary fiscal policy, what would the impact of it on the labour market be? Use an diagram if necessary.

(b) Define the natural rate of unemployment and discuss why do we concern about it in the economic analysis.

2. In Econtropica, there are only three goods, popcorn, movie shows, and drinks. The table shows the prices and quantities produced of these goods in 2000, 2010, and 2011:

(a) Find a growth rate between 2010 and 2011, using 2000 as a base year. Explain your working.

(b) A survey result shows that a typical family consumes 5 popcorn, 3 movie shows, and 3 drinks. Calculate the consumer price index for each of the three years, using 2000 as a base year.

(c) What is the rate of inflation from 2010 to 2011?

(d) Would the inflation rate be different if we use 2010 as a base year? Explain why.

3. Consider a closed economy with no government. The annual production function of the economy is given by  where A = 8. The economy saves 10% of its income and capital depreciates 5% each year.

(a) Find the production function per capita and draw a capital accumulation diagram.

(b) Calculate the country’s income and consumption for an initial level of capital per person of $144.

(c) Suppose the country introduced a new technology that changes A to 10. Calculate the income growth caused by this technological advance for the initial level of capital. Explain.

(d) Show the transition dynamics to the new steady-state of the economy.

4. Show the impact of the following events on the equilibrium interest rate in the relevant markets.

(a) The Central Bank sells government securities (bonds) in the open market.

(b) The Central Bank decreases the minimum reserve requirement of banks.

(c) Households and firms expect the economy will get out of recession soon.

5. Econia is a small exporter of tulips in the world market and therefore is a price-taker. Assume the demand and supply curves are given by and where Q is the quantity of tulip bulbs in millions and p is the price of tulip bulbs.

(a) What is the autarky price of tulip in Econia?

(b) If the world price, , of tulip is $3.5, find the gains from trade and show in the diagram. Who wins and who loses?

(c) Suppose the government of Econia decides to impose an export tax of $0.5. Calculate the impact of tax and show in the diagram. Explain