EC114 Additional Questions

Note this exam consists of more questions than the final exam will have; see http://rpubs.com/jjreade/EC114_sample_final_exam for a sample of the final exam with the exact same structure as the final exam

This exam consists of THREE sections. Answer ALL questions in Section A, ONE from Section B, and ALL from Section C.

Instructions:

• Time: 2 hours.
• No dictionaries permitted.
• No calculators permitted.

Section A

Each question is worth 3 marks.

This section in the final exam will have 10 questions

Provide a definition for each of the following:

1. Inflation
2. Exchange rate
3. Unemployment rate
4. Employment level
5. Total factor productivity
6. Government multiplier
7. Quantitative easing
8. Money illusion
9. Consumption
10. Investment
11. Interest rate
12. Frictional unemployment
13. Globalisation
14. Comparative advantage
15. Labour force
16. Capital
17. Money multiplier
18. The business cycle.
19. Savings
20. The welfare state.
21. Fiscal policy.
22. Monetary policy.
23. Gross domestic product.
24. Disposable income.
25. Growth accounting.

Section B

Each question is worth 35 marks

Choose one question

In the exam you will choose one from three. Here I am writing one question for each part of the course.

26. National income and accounts:
    1. What is national income and how is it measured?
    2. What are the problems with GDP measurement?
    3. Does, and should, GDP measure wellbeing?
27. Growth and Total Factor Productivity:
    1. What is total factor productivity (TFP) and how does it affect economic growth?
    2. What is the Golden Rule, and does it seem plausible?
    3. “TFP is just a residual and hence should be ignored.” Do you agree with this statement?
28. Unemployment:
    1. What is unemployment, and how do we measure it?
    2. Describe how effective government policy can be at influencing unemployment.
    3. Should governments explicitly target the unemployment rate?
29. Trade and globalisation:
    1. Explain the concept of comparative advantage.
    2. What determines a country’s comparative advantage? Can a government do anything about this?
    3. “Since free trade is beneficial, all countries should liberalise trade”. Explain and assess this statement.
30. Consumption and investment:
    1. What is consumption, and how is it determined?
    2. What is investment, and how is it determined?
    3. Derive the IS curve; how does it link consumption and investment?
31. Business Cycles:
    1. What is the business cycle? Can we measure it?
    2. Outline the Real Business Cycle Theory, and Keynesian models of business cycles. Which seem more plausible and why?
    3. “The little boat gently drifted across the pond exactly the way a bowling ball wouldn’t.” How does this analogy help when thinking about economic shocks, propagation mechanisms and business cycles?
32. Money and Prices:
    1. Define money and give three examples.
    2. What is the quantity theory of money, and how does it help explain inflation?
    3. “Inflation is always and everywhere a monetary phenomenon”. Is it?
33. Monetary policy:
    1. What is monetary policy, and how is it carried out in the UK?
    2. What are the transmission mechanisms that monetary policy relies on?
    3. Should the UK government consider changing the monetary policy regime?
34. Fiscal policy:
    1. What is fiscal policy, and how is it carried out in the UK?
    2. How can fiscal policy affect unemployment and inflation?
    3. What impact do general elections have on fiscal policy?
35. Banking:
    1. What are banks, and what useful purposes do they serve?
    2. What is the “lender of last resort”, and does it create a moral hazard problem?
    3. “The financial crisis of 2008 was caused by an absence of effective regulation, rather than an absence of regulation”. Explain.
36. Debt and Soveriegn Default:
    1. What is the budget deficit, and what is the national debt? Do either really matter?
    2. How do we determine whether a level of debt is sustainable for a country?
    3. “We should forgive all poor countries their debts to us.” Explain and discuss.

Section C

This question is worth 35 marks

There will be only one question in this section in the exam. Here I provide a number of example questions on exchange rates for your benefit

37. Exchange rates:
    1. What are exchange rates, and what are currency crises? [15]
    2. Do first and second generation models of currency crises adequately explain all observed currency crises? [10]
    3. “Any form of exchange rate intervention is doomed to failure.” Do you agree with this statement? [10]
38. Exchange rates:
    1. What is the balance of payments, and what is the exchange rate? [15]
    2. What are the advantages and disadvantages of fixed exchange rate systems? [10]
    3. Does this analysis enable you to make any insights into resolving the Eurozone crisis? [10]
39. Exchange rates:
    1. What is the Law of One Price, and what is Purchasing Power Parity? Are they the same concept? [15]
    2. How does the model of purchasing power parity help in explaining real-world exchange rate movements? [10]
    3. What other theories exist on exchange rate determination? [10]
40. Exchange rates:
    1. What are the theories of covered and uncovered interest rate parity? What is the carry trade? [15]
    2. How well have these theories fared when explaining real-world nominal exchange rate movements? [10]
    3. “Nobody really thinks that macroeconomic fundamentals matter for short-run exchange rate determination”. Evaluate this statement.