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Prof. Yankey
ECC
Macroeconomics Final Exam
Please show all work, calculations and box your final numerical answers. Draw all
charts and graphs. Label all graphs fully and use color. Give numerical answers
in the proper units. Explain your answers in your own words, and remember to
put them in essay form. Cite all references. This must be typed, graphs/charts
may be done by hand.
1. a. The following data is for the Obsidian Banking system, whose
slogan is; Money: dont loan today, what you might "reserve
tomorrow! Use the following data to set up a balance sheet; Securities
= $50,000, Demand Deposits = $250,000, Loans = $90,000, Reserves
=$80,000, Capital stock = $100,000 Property = $130,000. Assuming
that the reserve ratio is 25%, use the data to answer the following
questions. (All figures are in billions)
i.
ii.
iii.
iv.
(3)
AD1
$2100
2200
2250
2300
2400
(4)
AD2
$2200
2340
2350
2400
2500
(5)
Real GDP2
$2490
2490
2450
2400
2300
i.
ii.
What is the equilibrium real GDP and the price level? Suppose that
the AD is now at column 4; what will be the new equilibrium price
level and real GDP? Draw a graph showing the two changes.
Now assume that AS is now at column 5, while AD stays at column
4, what will be the new price level and real GDP? Draw a graph
showing the new results.
Asset demand
$200
300
400
500
If the transaction demand for money equals 15% of nominal GDP, the
nominal GDP is $5000 billion, and the supply of money is $1050 billion,
what is the equilibrium interest rate? (6pts.)
ii
Calculate the total demand for money at each interest rate. Be sure to
show work and the corresponding interest rates. (4pts.)
iii
If the nominal GDP remains constant, and the money supply is increased
to $1250 billion, what will be the equilibrium rate of interest? (4pts.)
4. The data below was compiled by the Jose and Ana G. of Whoa Pah
GunDamstyl Research Group, showing the supply and demand schedules for
health care.
Quantity
Quantity
Price ($)
Demanded
Supplied
10,000
400
1200
9,000
500
1100
8,000
600
1000
7,000
700
900
6,000
800
800
5,000
900
700
4,000
1000
600
3,000
1100
500
i)
ii)
Now assume that health insurance cuts the price of health care by
half (1/2) for the consumer. What will be the new price for the
consumer and the quantity demanded? (4pts.)
iii)
Draw the graph showing the equilibrium price and quantity when
there is no health insurance. (6pts.)
iv)
v)
(2)
Dm
$1,600
1,900
2,300
2,600
2,900
(3)
Sm1
$2,300
2,300
2,300
2,300
2,300
(4)
Sm2
$2,600
2,600
2,600
2,600
2,600
(5)
Sm3__
$1,900
1,900
1,900
1,900
1,900
i. Using the data from the table draw the graph. (4pts)
ii. Given the demand for money, what will be the equilibrium interest rate
for each of the different supply of money schedules? You must give the
supply of money as well as the interest rates. (6pts)
iii. Assume the economy was in equilibrium at Dm and Sm1. If Nesrine decides
to change the money supply to Sm2, and the interest rate stays the same,
how much of a shortage or surplus in the money supply will there be? (6pts)
b. International spies; Marcia, Rocio and Sheidy of MANYOSA Inc.,
were engaged in a debate over the merits of trade barrier arguments.
Help them resolve their dilemma by discussing any four arguments for
imposing trade barriers. (I.e. Quotas, etc.) (8pts.)
What grade do you believe that you have earned in this course?
Explain in two sentences and put your name at the end.
No fantasy grades, please.