EC114 Introductory Macroeconomics Midterm Exam

This exam consists of THREE sections. Answer ALL questions in Section A, ONE from Section B, and ONE from Section C (on reverse side).

Instructions:

• Time: 1 hour.
• No dictionaries permitted.
• No calculators permitted.

Section A

Answer ALL questions. Each question is worth 3 marks.

Provide a definition of the following concepts:

1. Unemployment
2. Productivity
3. The natural rate of unemployment
4. Gross domestic product
5. Gross national product
6. Inequality
7. Capital
8. Investment
9. Depreciation
10. Total factor productivity

Section B

Answer one question.

11. National income and accounts:
    1. What is national income and how do we measure it? [15]
    2. To what extent does measuring national income equate to measuring economic welfare? [10]
    3. Discuss the issues sirrounding creating an alternative measure for national income? [10]
12. Growth and Total Factor Productivity:
    1. What is total factor productivity (TFP) and how does it affect economic growth? [15]
    2. What is the Golden Rule, and does it seem plausible? [10]
    3. “Growth always leads to more inequality; do we really want more growth then?” Do you agree with this statement? [10]
13. Unemployment:
    1. What is unemployment, and can we measure it? [15]
    2. Describe and discuss determination of the natural rate of unemployment. [10]
    3. Should governments explicitly target the unemployment rate? [10]

Section C

14. Theory and reality:
    1. Define an economic fact, and an economic theory. How are the two related? [15]
    2. What constitutes a useful economic model? Can you give an example? [10]
    3. “The world must abandon obsolete economic theories”. Does this seem like good advice? [10]