# UT ECO 320L - final_spr_2017 (12 pages)

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# final_spr_2017

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## final_spr_2017

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Pages:
12
School:
University of Texas at Austin
Course:
Eco 320l - Macroeconomic Theory
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University of Wisconsin Madison Department of Economics Eco 302 Intermediate Macroeconomics Final Exam You have 2 00 to complete this exam The highest score is 115 points but the grade will be out of 100 Good Luck 1 2 1 Short Answer 10 Points Each 1 1 Consider the Solow Growth model with the assumption that people require some minimum consumption so that the per worker investment is given by it sAf kt m Plot required investment per worker for the economy to be in a steady state as well as actual investment per worker and show that there can be two steady states 1 2 Suppose that Starbucks sells 1 Billion dollars worth of coffee and pays 500 million for the beans they are imported At the same time households buy 500 million worth of beans to brew at home half of which is imported and half of which is grown domestically Calculate the change in consumption net exports investment and GDP from this coffee drinking activity 3 1 3 Your friend estimates that consumption demand is given by statistician 1 Y f where r is in decimals Y is current income and Y f is future C d 45 Y 1 r f A income She also estimates that investment demand is given by I d 1 r f where A is future capital productivity Solve for the IS Curve i e solve for the market clearing interest rate as a function of Y keeping Y f and Af fixed Draw how the IS curve shifts if there is a simultaneous rise in Af and Y f 1 4 You find data on the country of Stankonia In this country nominal GDP grows at 10 per year total labor grows at 0 per year the nominal value of capital grows at 5 per year and the annual inflation rate is 5 If the production function is given by Yt At Nt0 7 Kt0 3 where Yt and Kt represent real GDP and value of capital what is the growth rate of At Show your calculations 4 1 5 Suppose that the federal reserve attempts to keep the price level constant over time Show in the money market diagram how they would need to change the nominal money supply in the long run if labor productivity was to

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