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INTERMEDIATE MACROECONOMICS (ECON 022)

FINAL EXAMINATION

NAME:

NOTE: ATTEMPT ALL QUESTIONS. ALL QUESTIONS CARRY EQUAL MARKS

Question 01: Using the AD and AS model, please explain the short-run and Long-run effects of change in Money supply (Consider M > 0).

Question 02:

In Movieland, there are only 3 goods: popcorn, movie shows, and diet drinks. The following table shows the prices and quantities produced of these goods in 2013, 2014, and 2015:

Year	Price of popcorn	Quantity of popcorn	Price of movie shows	Quantity of movie shows	Price of diet drinks	Quantity of diet drinks.
2013	$5	450	$25	225	$15	150
2014	$6	550	$50	250	$12	200
2015	$9	950	$65	275	$ 10	275

Required: (2013 is base year)

a) Calculate the Nominal GDP for all three years.

b) Calculate the Real GDP for all three years.

c) Calculate the annual growth rate of nominal GDP ( for 2014 & 2015)

d) Calculate the annual real economic Growth rate (for 2014 & 2015).

Question 03: Suppose V is constant, M is growing 5% per year, Y is growing 2% per year, and r = 4.

a. Solve for i.

b. If the Central Bank increases the money growth rate by 2 % per year, find i.

c. Suppose the growth rate of Y falls to 1% per year.

What will happen to ?

What must the Central Bank do if it wishes to keep constant?

Question 04:

Explain the Concept (s):

a.) Rational People Think at the Margin.

b.) People Respond to Incentives

Question 05 (a): Define Frictional unemployment & Structural unemployment

Question 05 (b):

If each month, 1% of employed workers lose their jobs and 19% of unemployed workers find jobs. Find the natural rate of unemployment?