ĐỀ THI MACROECONOMICS (CÓ LỜI GIẢI)

THE INTERNATIONAL UNIVERSITY (IU) – VIETNAM NATIONAL UNIVERSITY – HCMC FINAL EXAM – TEST A Date: August, 2014 Duration: 120 minutes Name : Student ID: SUBJECT: MICROECONOMICS Dean of School of Business Signature: Lecturer Signature: Full name: Full name: Dr Tu Van Binh GENERAL INSTRUCTION(S) This is a half opened book examination (Students are allowed to bring one A4 page (both sizes) of handwriting in the exam room) No talking during the exam No cell phone, laptop and PDAs are used during the exam No dictionary This exam includes two parts ANSWER SHEET Note: a a Selected Stick ONLY ONE answer for each question 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c Unselected d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Reselected a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b c c c c c c c c c c c c c c c c c c c c c c c c c c c c c c d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d Part I: 60 multiple choice questions (60 marks) Which of the following is a major source of inflation in Vietnam? a faster growth of the money supply than growth in GDP b monopoly power c low productivity d government regulation If a government supplies more money than the quantity people want to hold a spending will decrease and the price level will fall b spending will increase and the price level will rise c spending will remain constant but the price level will rise d there will be no change in the level of economic activity or prices; money is neutral The inflation tax is a a tax on windfall profits b a special tax imposed on owners of shares of stock c a special tax imposed on profits when inflation is over 10% per year d the loss incurred when inflation reduces the purchasing power of money The beneficiaries of the inflation tax are a those who borrow money b all corporations c all multinational corporations that can shift assets into alternative currencies d exporters of goods and services The supply of foreign exchange is a determined by the real exchange rate b independent of the real exchange rate c determined by central bankers d determined by the President The exchange rate is the a value of money b quantity of dollars, yen, etc., that are traded on currency markets c amount of foreign currency that is used to buy goods made in your country d number of units of a foreign currency that can be bought with one unit of your own currency Currencies depreciate and appreciate all the time Who gains and who loses when the Vietnam Dong depreciates? a Americans holding VN Dong gain, U.S tourists to Vietnam lose b U.S exporters to Vietnam gain, Vietnamese holding US Dollars lose c Vietnamese exporters gain, Vietnames importers lose d Vietnames importers gain, Vietnames exporters lose When Italy devalues its currency a the dollars per Italian lira will increase b the drain of U.S reserves on Italian lira will fall c U.S exports to Italy will increase d the price of imported Italian olive oil in the United States will fall When fewer U.S dollars are needed to buy a unit of Japanese yen, the dollar a is devalued b is inflated c appreciates d depreciates 10 If one country has a lower inflation rate than other countries, its a currency tends to appreciate b currency tends to depreciate c real interest rate will be higher than in other countries d nominal interest rate will be higher than in other countries 11 In the long run, exchange rates a are determined by business cycle fluctuations b are determined by movements of Eurodollars c will adjust until the price of a bundle of goods is the same in both countries d will reflect economic fluctuations in both countries 12 If you were told that the exchange rate was 1.5 U.S dollars per Canadian dollar (CDN), that would mean that Canadians would have to spend to by a $12 watch in New York City a $18 CDN b $15 CDN c $1.5 CDN d $12 CDN 13 a b c d Studies of money demand indicate that the nominal demand for money does not depend on interest rates does not depend on the price level is proportional to the price level is proportional to the nominal interest rate 14 In 1985, the U.S government indexed the federal personal income tax system With indexing, households are pushed into a higher tax bracket only if their nominal income a rises as fast as the rate of inflation b rises slower than the rate of inflation c rises faster than the rate of inflation d decreases by the amount of inflation 15 Investors criticize the federal income tax system because they must pay taxes a on gains that merely reflect the effects of inflation b only on gains that exceed the effects of inflation c on losses as well as gains d on losses but not on gains 16 Which of the following would be classified as a direct foreign investment? a a purchase of 100 shares of British Petroleum stock b a loan of $1 million to a Brazilian utilities firm c a loan of $1 million from the World Bank to Vietnam d building a new Pizza Hut in HCM City, Vietnam 17 12 Net capital outflow measures a the flow of goods and services between countries b the flow of assets between countries c government budget surpluses and deficits relative to those experienced in other countries d the amount of physical capital built in foreign countries 18 13 a b c d U.S trade deficits are a sign of reduced national savings reduced production of manufactured goods an over reliance on the service economy high rates of unemployment in the U.S economy 19 After reunification, Germany experienced a tremendous increase in the demand for loanable funds as many rebuilding projects were initiated As a result, interest rates a rose, there was a decrease in net capital outflow, there was a decrease in the supply of marks, and the real exchange rate fell b rose, there was a decrease in net capital outflow, there was a decrease in the supply of marks, and the real exchange rate rose c fell, there was an increase in net capital outflow, there was a decrease in the supply of marks, and the real exchange rate rose d fell, there was an increase in net capital outflow, there was an increase in the supply of marks, and the real exchange rate fell 20 Japan has historically had a high savings rate relative to other countries This means that the a supply of loanable funds is larger, interest rates are lower, and net capital outflow is higher b supply of loanable funds is smaller, interest rates are lower, and net capital outflow is higher c demand for loanable funds is larger, interest rates are lower, and net capital outflow is higher d government must subsidize production in order to encourage international trade 21 Gaussland has net exports of $400 million and buys $300 million of goods from overseas Gaussland has a $700 million of imports, and $700 million of exports b $300 million of imports, and $700 million of exports c $300 million of imports, and $400 million of exports d None of the above are correct 22 In the second quarter of 2000, U.S net exports were about -$380 billion and imports were about $1,380 billion Therefore, exports were about a $1,720 billion b $1,000 billion c $340 billion d None of the above are correct 23 A country sells more to people overseas than it buys from them It has a a trade surplus and positive net exports b a trade surplus and negative net exports c a trade deficit and positive net exports d a trade deficit and negative net exports 24 International trade a lowers the standard of living in all trading countries b c countries d leaves the standard of living unchanged raises the standard of living for importing countries and lowers it for exporting can raise the standard of living in all trading countries 25 Exports are a domestic stocks and bonds sold abroad b foreign stocks and bonds sold domestically c foreign-produced goods and services sold domestically d None of the above are correct 26 Imports are a domestic stocks and bonds sold abroad b foreign stocks and bonds sold domestically c domestically produced goods and services sold abroad d foreign-produced goods and services sold domestically 27 The trade balance a must be zero b must be greater than zero c can be less than, greater than or equal to zero d None of the above are correct 28 If exports are less than imports, the trade balance a is in deficit b is balanced c is in surplus d cannot be determined from this information alone 29 An open economy's GDP is given by a Y = C + I + G + S b Y = C + I + G + NX c Y = C + I + G d Y = C + I + G + T 30 Which of the following factors affects a country's net foreign investment? a real interest rates paid on foreign assets b the perceived economic and political risks of holding assets abroad c government policies that affect foreign ownership of domestic assets d All of the above are correct 31 The open-economy macroeconomic model takes a GDP as given b the price level as given c Both a and b are correct d None of the above are correct 32 In the open-economy macroeconomic model, the supply of loanable funds comes from a national saving b foreign saving c domestic investment d the sum of domestic investment and net foreign investment 33 A higher real interest rate raises the quantity of a loanable funds demanded b loanable funds supplied c domestic investment d net foreign investment 34 A fall in the real interest rate a encourages investment and so increases the quantity of loanable funds demanded b encourages investment and so decreases the quantity of loanable funds demanded c discourages investment and so increases the quantity of loanable funds demanded d discourages investment and so decreases the quantity of loanable funds demanded 35 In the figure shown, if the real interest rate is percent, there will be a b c d equilibrium a shortage of 25 a shortage of 50 None of the above are correct 36 Net foreign investment = net exports implies that a national saving equals domestic investment b the volume of exports equals the volume of imports c the supply of dollars equals the demand for dollars in the foreign-currency exchange market d All of the above are correct 37 The price that balances supply and demand in the market for foreign-currency exchange is the a real exchange rate b real interest rate c nominal exchange rate d nominal interest rate 38 According to theory of purchasing-power parity, a person should be able to purchase a The same amount of foreign currency with a dollar whatever country they travel to b The same amount of goods with a dollar whatever country they travel to c Both a and b are correct d None of the above are correct 39 Suppose that the U.S imposes an import quota on Vietnamese Catfish The quota makes the real exchange rate of U.S dollars a appreciate and the real interest rate in the U.S increase b depreciate and the real interest rate in the U.S decrease c appreciate but does not change the real interest rate in the U.S d depreciate but does not change the real interest rate in the U.S 40 Trade policies that directly affect a country’s exports or imports have no effect on that country’s a net foreign investment b real interest rates c national saving d Trade policies have no effect on any of the above 41 During recessions a firms may find they are unable to sell all they produce b workers are laid off c factories are idle d All of the above are correct 42 Most economists use the aggregate demand and aggregate supply model primarily to analyze a fluctuations in the economy b the bond and money markets c the long-run effects of international trade d the demand for particular products such as automobiles 43 Real GDP a is not adjusted for inflation b not measures income c moves in the same direction as unemployment d None of the above are correct 44 The classical dichotomy refers to the separation of a real and nominal variables b changes in money and changes in government expenditures c endogenous and exogenous variables d business cycle and other variables 45 According to classical economic theory, changes in the money supply a b c d affect nominal variables and real variables affect nominal variables, but not real variables affect exogenous variables, but not endogenous variables affect real variables, but not nominal variables 46 Which of the following shows the total quantity of goods and services that people throughout the economy want to sell? a the aggregate demand curve b the market demand curve c the aggregate supply curve d the market supply curve 47 The downward slope of the aggregate demand curve shows that an increase in the a money supply causes the aggregate quantity of goods and services demanded to increase b money supply causes the aggregate quantity of goods and services demanded to decrease c price level causes the aggregate quantity of goods and services demanded to increase d price level causes the aggregate quantity of goods and services demanded to decrease 48 Aggregate demand shifts right when the government a raises personal income taxes b increases the money supply c repeals an investment tax credit d All of the above are correct 49 The aggregate supply curve is vertical a in the short and long run b in neither the short nor long run c in the long run, but not the short run d in the short run, but not the long run 50 The sticky wage theory of the short-run aggregate supply curve says that when the price level rises more than expected, the real wage a rises, so employment rises b rises, so employment falls c falls, so employment rises d falls, so employment falls 51 Aggregate demand is affected by a monetary and fiscal policy b spending by households and firms c Both of the above are correct d None of the above are correct 52 Policymakers might try to offset the changes created by a change in household spending by changing a government expenditures b the money supply c Changing either of the above d Changing neither of the above 53 Which of the following is not a reason the aggregate demand curve slopes downward? As the price level increases a b c d real wages decline real wealth declines the interest rate increases the exchange rate increases 54 Liquidity preference refers directly to Keynes’s theory concerning a an explanation for sticky wages and prices b an explanation for the existence of foreign trade c the effects of changes in money demand and supply on interest rates d the effects of changes in money demand and supply on exchange rates 55 If expected inflation is increase, then when the nominal interest rate increases, the real interest rate a increases b decreases c is unchanged d might any of the above 56 According to the theory of liquidity preference, the money supply is a independent of the interest rate b positively related to the interest rate c negatively related to the interest rate d positively related to the interest rate at low interest rates, and negatively related at higher rates 57 Assume the money market is initially in equilibrium If the price level decreases, according to liquidity preference theory there is a excess supply of money until the interest rate increases b excess supply of money until the interest rate decreases c excess demand for money until the interest rate increases d excess demand for money until the interest rate decreases 58 An increase in the MPC a increases the multiplier, so that changes in government expenditures have a larger effect on aggregate demand b increases the multiplier, so that changes in government expenditures have a smaller effect on aggregate demand c decreases the multiplier, so that changes in government expenditures have a larger effect on aggregate demand d decreases the multiplier, so that changes in government expenditures have a smaller effect on aggregate demand 59 Friedman and Phelps argued that a Classical theory was flawed, so there was a logical explanation for a long-run tradeoff between inflation and unemployment b there was neither a short-run nor long-run tradeoff between inflation and unemployment c in the long run, monetary growth did not influence those factors that determine the economy’s unemployment rate d the Phillips curve could be exploited in the long run by using monetary, but not fiscal policy Most economists believe that a tradeoff between inflation and unemployment exists 10 a b c d only in the short run only in the long run in both the short and long run in neither the short nor long run Part II: Problem Solving or Essay Questions (40 marks) Students choose to answer TWO of Three questions Question 1: For various reasons, fiscal policy changes automatically when output and employment fluctuate a Explain why tax revenue changes when the economy goes into a recession b Explain why government spending changes when the economy goes into a recession c If the government were to operate under a strict balance-budget rule What would it have to in a recession? Would that make the recession more or less severe? Answer: a Tax revenue declines when the economy goes into a recession because taxes are closely related to economic activity In a recession, people's incomes and wages fall, as firms' profits, so taxes on these things decline b Government spending rises when the economy goes into a recession because more people get unemployment-insurance benefits, welfare benefits, and other forms of income support c If the government were to operate under a strict balanced-budget rule, it would have to raise tax rates or cut government spending in a recession Both would reduce aggregate demand, making the recession more severe Question 2: Suppose the Government reduces taxes by VND 2000 Billion, and there is no crowding out The marginal propensity to consume (MPC) is 0.75 a) What is the initial effect of the tax reduction on aggregate demand? b) What additional effect follow this initial effects? What is the total effect of the tax cut on aggregate demand? c) How does the total effect of this VND 2000 Billion tax cut compare to the total effect of a VND 2000 Billion increase in government purchases? Why? Answer: Dr Trieu a) VND 2000B tax reduction will increase households take-home income by 2000B And because MPC = 75, Consumption will increase 1500B, therefore AD initially increases by only 1500B b) The following effect will be the multiplier effect which increase further AD up to 6000B [1500*1/(1-MPC)] c) This total effect is smaller the the effect of an increase of 2000B G purchases When G increases 2000B, AD increases initially by 2000B and therefore its total effect will be 8000B increase in AD Question 3: Based on questions related to ‘the monetary system) as below, please present your answers 11 Gold has been called “the ultimate burglar alarm.” Explain what this expression means? Answer: Government ‘Burgle” holders of their currencies by printing more money and subjecting holders to an ‘inflation tax.” Since gold prices responds quickly to evidence of inflation of an increase in inflation will cause a jump in gold prices In this way, gold serves as a burglar alarm to warn that politicians are tampering with fiat money a Suppose Vietnam attempt to pursue independent monetary and fiscal policies How will exchange rates behave? Answer: Independent monetary and fiscal policies will lead to volatile exchange rates as market participants receive and assess new information on these policies b “For a fixed exchange rate system to work the government must be able to make tight budget and monetary policies stick from the outset.” Comment Answer: A government that runs budget deficits and a lax monetary policy is unlikely to be able to maintain its commitment to a fixed exchange rate Hence, one that starts out on the wrong foot will appear to observers to be willing to make exchange rate policy subservient to other national interests Recognizing this apparent lack of government commitment to a fixed exchange rate, speculator are more likely to attack its currency, making its ability to maintain the fixed exchange rate even more doubtful 12 [...]... marginal propensity to consume (MPC) is 0.75 a) What is the initial effect of the tax reduction on aggregate demand? b) What additional effect follow this initial effects? What is the total effect of the tax cut on aggregate demand? c) How does the total effect of this VND 2000 Billion tax cut compare to the total effect of a VND 2000 Billion increase in government purchases? Why? Answer: Dr Trieu a) VND... [1500*1/(1-MPC)] c) This total effect is smaller the the effect of an increase of 2000B G purchases When G increases 2000B, AD increases initially by 2000B and therefore its total effect will be 8000B increase in AD Question 3: Based on questions related to ‘the monetary system) as below, please present your answers 11 Gold has been called “the ultimate burglar alarm.” Explain what this expression means?... revenue declines when the economy goes into a recession because taxes are closely related to economic activity In a recession, people's incomes and wages fall, as do firms' profits, so taxes on these things decline b Government spending rises when the economy goes into a recession because more people get unemployment-insurance benefits, welfare benefits, and other forms of income support c If the government... currencies by printing more money and subjecting holders to an ‘inflation tax.” Since gold prices responds quickly to evidence of inflation of an increase in inflation will cause a jump in gold prices In this way, gold serves as a burglar alarm to warn that politicians are tampering with fiat money a Suppose Vietnam attempt to pursue independent monetary and fiscal policies How will exchange rates behave?... commitment to a fixed exchange rate Hence, one that starts out on the wrong foot will appear to observers to be willing to make exchange rate policy subservient to other national interests Recognizing this apparent lack of government commitment to a fixed exchange rate, speculator are more likely to attack its currency, making its ability to maintain the fixed exchange rate even more doubtful 12