Macroeconomics

at Maastricht University

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APR 03
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in chapter 6, nominal vs real interest rate, how to derive rt from it, in 1. I wrote (i+it)pt but it should be (1+it)pt
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Does anybody know where can i get the keys for questions and exercises in the book? Thanks.
I found some of them via google, literally copy pasted the exercise , but haven't found a place with all answers together
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Is this summary's from the 7th edition?
Don't know for sure but it covers everything thing for last year's exam which was based on the 7th edition
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how do you solve 41?? Investment per worker
Output per worker = 100 000 Savings = 1-c = 1-0.6 = 0.4 Investment per worker = 0.4*100 000= 40 000
What is the difference between real and nominal?
nominal looks at prices while real looks at goods. Don't know in which sense you are asking but this is the most general. Sorry for the late reply.
did we discuss fine tuning policies in the course ?
I think in Chapter 21
How do you solve this ?
Investment per worker = Savings*output per worker. Output per worker = 100 000 Savings = 1-c = 1-0.6 = 0.4 Investment per worker = 0.4*100 000= 40 000
Can somebody please explain why it is D? I don't see how any of the options fit into the 3 definitions of GDP
Purchasing a house falls under ''investment'', while the other options like C) fall under ''consumption''. Since the question asks for ''investment component of GDP'', D) is the right answer.
Did we cover Fisher?
No we did not, don't worry
we discussed it in my tutorial so maybe just in case read it
How do you solve this ?
Here it is:
Does anyone know how to do these? Thanks in advance!
For 46 and 47 Check the box on page 267
Can somebody explain why it isn't c? If the central bank buys bonds, they increase the money supply, so interest rate falls
don't worry, we didn't cover upward sloping lm curve
Did we cover sacrifice ratio?
No, if they put something like that at the exam, just complain about it
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did we cover ad and as ??
no
How do you calculate the leverage ratio ?
assets / capital
how?
growth rate of money times monetary base (0.04X0.06=0.0024) so answer is 0.024 %
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How to solve 33?
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how to solve exercise 20 ?
Well we know the multiplyer has a value of 2.5, so any 1 unit change in G will cause Y to change by 2.5. Since we are interested in the value of G, we take 1/multiplyer = 1/2.5 = 0.4. So we now know that a shift of 0.4Y in G is the increase
how to solve that?
Real intrest rate = Nominal Intrest rate - Inflation Real = 2%-3%= -1%
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how to solve 57?
Do we need to know this for the upcomming exam? And if so, how is this calculated?
But then, according to that formula, the higher the interest rate of the risky country, the lower the default rate will be, which does not make sense
could anybody help me with this equation ?
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How did you come to the formula S = I + (G-T)?
It is another way of seeing the equilibrium in the goods market. read the end of chapter 3 , where they talk about keynes
How can you have a monetary policy (shifting the LM curve) without changing the interest rate ?
Old book. Its not relevant for us
How do you get to C? :)
This isn't relevant for us( since we don't consider exports and imports). But the answer is C since: Public Saving + Private Saving = Private investment - (Imports - exports) = -3% + private saving = 16%- 5% Private Saving = 11+3 = 14
thanks!
Why is the answer D ?
The money multiplier = 1/1-c1 and for the money multiplier to be larger than 1, c1 must be larger than 0, but smaller than 1. So to answer, the question, you must look at which of these influence c1 directly, and that is none.
How do I get to answer A? I got answer B all the time...
How do I get to answer c? for question 36?
Inflation = Money Growth - Output growth = 5% - 2% = 3% Real Interest Rate = Nominal interest - Inflation Nominal intrest = real intrest +inflation = 1%+3% = 4% Hence, C
does anybody know this equation to calculate ?
Here's the solution!
Bt / Yt = (1+r-g)*Bt-1/Yt-1 + (Gt-Tt)/Yt Given : Bt-1/Yt-1 = 60 Gt-Tt/Yt = 1.2 r = 0.03 You want this year's debt to be the same as last year's, so also set Bt/Yt = 60 and solve for g.
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You're an actual legend, thank you !
Why would it positive (i.e. Answer B)? Wouldn't during a boom the revenues of the government exceed its expenses, leading to a negative budget deficit?
Why is B not correct?
Because decreasing returns to capital implies that multiplying K by a certain number leads to a smaller number than the initial increase in K. E.G) if you quadruple K for answer B you only get double Y, not four times Y. On the other hand, if you quadruple capital in B, your output actually decreases. Since the question wants RETURNS TO CAPITAL, it implies that an increase in K will lead to an increase in Y. Hence, since B doesn't do this, it is wrong.
do we have concepts like "principle of neutrality of money" and "Lucas critique" in our book? cause in the exam she published she didn't take out these questions
Is the money multiplier a relevant topic for us?
Yup, appendix chapter 4 kinda covers it
Thanks!
Hey ! Does anyone know which open parts of past exams are relevant for us? Thanks !
She said the ones we did in our tutorials and the one she uploaded
Where can I find the one she uploaded?
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Thank you very much. You calculated nominal interest rate 4% minus growth 3%. But why is it not nominal interest rate minus inlation rate to recieve real interest rate. Because in the equation we use the real interest rate minus the growth rate. But calculating it like this would not end up at answer D. WHy do we need to use the nominal interest rate here?
I used real interest rates, so my r= -1%. Had I used nominal I would have gotten -1.01/(1.01), implying a -100% debt to GDP (which doesn'tâ€‹ make sense). By using real (4-2)=2, and subtracting growth from it (2-3)=-1, my final equation led to -1%/-1%= 100%
how to solve this?
Normal growth rate implies growth rate at equilibrium. In order to keep unemployment rate at a constant, we must set Gy = 0.02, as this is the only way to ensure equilibrium. You can also think of it as setting inflation to be constant (equilibrium). So: 0 = -0.5(Gy -0.02). Rearranging leads too: Gy=0.02, which means growth rate is 2%.
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- How do they calculate for question 21 ? - For question 32, why is it B and not A ? -How is it calculated for question 35 ? - Why is it D for question 37 ? - Why is it B for question 49 ?
35: inverse of alpha .. alpha is 0.25, so the inverse is 4 37: it is just labour productivity plus labour growth (here negative) -> 1.5 + (-05)= 1
Question 21: Its easiest to think about it as if there were four month without any employment, and that from then on people started getting employed . Hence, four month of unemployment means 4*200000= 800 000 unemploymened. From then on every month the same number go in and out, so it stays at 800 000. Hence D. Question 32: Nominal wages will change, as part of nominal wages is the expected price level of the year. If money supply is higher, expected price levels will go up. Nominal wages will change. In medium run equalibrium everything is being produced at natural output, so inflation is zero. Hence price level doesn't change, so the answer is B. (Though I don't think we covered principle of neutrality of money). Question 35: Not relevant for us (not covered) Question 37: Answerd above Question 49: Don't think its relevant for us.
IS curve is related to Goodmarket and also demand. So higher credit interest rates, less investment, less spending and less demand. So IS curve shifts left
Why is it not all of the above?
Standard of living isn't measured using GDP per capita (since PPP isn't counted here), hence it isn't A, since you can't compare the standard of living without consider the Purchasing power parity
Why is C correct?
Looking at the data we can see that inflation is most constant when unemployment is 5%. Since we want inflation, we know that we want unemployment to be lower than natural rate of unemployment (from the Phillips equation). Since inflation is constant at 5% unemployment we can say that is the natural rate, so to have inflation we need unemployment below 5%, hence C
do we have that content in the book for this year? I don't remember that we covered it
noo we did not cover this
No, aggregdate demand and supply are irrelevant for us
Are we supposed to know how to calculate the government spending multiplier? If so, could somebody please say in which chapter it's explained?
Chapter 3
Thank you!!
How do i come on answer B ?
Well we know the multiplyer has a value of 2.5, so any 1 unit change in G will cause Y to change by 2.5. Since we are interested in the value of G, we take 1/multiplyer = 1/2.5 = 0.4. So we now know that a shift of 0.4Y in G is the increase
Is this part of the book?
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Does someone know why question 7) is C 100?
How to solve that question?
-2 is the multiplierr in front of the difference between ut and un so just divide 0.1 by 2 and you will get 5%=un
At Natural rate of unemployment, expected inflation is equal to actual inflation. so you take the expected inflation to the other side of the equation, and since they are equal you get: 0=-2Ut+0.1. Rearranging this you move the 0.1 to the other side and get : -0.1/-2 = 0.05. Hence the answer is 5%
is it here 100% + 4% = 104 %? or how could i calculate it?
First, real interest rate = 10-7= 3%. Next, we know that debt in a year is equal too 1 plus real interest minus growth, times the debt in the previous year + the current year's deficit. In this case (1+ 3%-3%)*100% + 4% = 100%+4%= 104%
how do i calculate this qeustion?
AS there is 5% of return on assets (200*0.05=10) and 4% of going interest on liabilities (160*0.04=6.4) you have a return of 10-6.4= 3.6. As a ratio to capital you obtain: 3.6/40= 0.09, which is an expected rate of return on capital of 9%.
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where can I find the answer key for this?
Question 6 and 7) Does someone know how we can find the right answer here?
Sorry! That was a typo, its supposed to be 0.6! The calculation is right though!
Autonomous Spending: (c0++I+G-c1*T) Multiplier: (1/(1-c1))=2.5
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