Departement of Economics, Faculty of Economics and Business
Universitas Padjadjaran Departement of Economics, Faculty of Economics and Business
CODE A
Principles of Macroeconomics Review
Time : 90 Minutes Closed books and Notes Permitted materials: Non – programmable calculator; Dictionary
General Instructions
1. Read the brief instructions before answering the questions
2. Read the questions carefully and don’t panic!
3. Do not ever cheat during the test in any way. Any illegal actions will get an appropriate punishment
4. Do not write anything on the question paper. The question paper is used. If you have given up on all questions, please just leave the room and get some fresh air!
TIPE A Multiple Choice (30%)
d. 16,67
c. AUD 387,98
b. AUD 236,21
a. AUD 198,43
d. THB 4849 $421, how much it will cost in Australia?
c. THB 4188
b. THB 1845
a. THB 269
5. In open economy system, Thailand GDP in 2014 is THB 17512 which consists of consumer spending for THB 5762, saving for THB 6118, and net export for THB 4235. How much the government spends their money for national activity?
d. Fisher effect
c. Inflation tax
b. Shoe leather cost
4. Inflation will make people walk to the bank more often in order to reduce money holding. This condition is called …… a. Menu cost
c. 26,67
1. Suppose V is constant, M is growing 5% per year, Y is growing 2% per year, and r = 4. Solve for i . . .
b. 20
a. 13,33
3. Suppose Indonesia produced 2 ton of potatoes. The quantity of money is Rp 5.000.000 and the peoples spend a total of Rp 40.000.000 per year of potato. If the output increased by 50 % and the quantity of money change to Rp 6.000.000, what is the velocity of money?
d. Is higher when each dollar is used more frequently
c. Is higher whenthe interest rate is high
b. Depends only on the amount of money in the economy
a. Is higher when the real gross domestic product is high
2. The velocity of money…
d. 2
c. 1
b. 7
a. 3
d. AUD 456,83
7. If Philippines capital outflow is about 7844 in 2013 and its inflow is about 8736. What does this means and how much its net foreign investment? a. Budget surplus, 892
b. Budget deficit, -‐892
c. Trade surplus, 892
d. Trade deficit, -‐892
8. In 2010 we can buy S$1 for Rp10.000. In 2013 we have to pay Rp11.500 to get S$1. What happen to Indonesia Rupiah?
a. Appreciating
b. Depreciating
c. Deficit
d. Surplus
9. If there is a surplus of loanable funds in Indonesia, the quantity of loanable funds demanded in Indonesia is a. greater than the quantity supplied and the interest rate will rise
b. greater than the quantity supplied and the interest rate will fall
c. less than the quantity supplied and the interest rate will rise
d. less than the quantity supplied and the interest rate will fall
10. Suppose that the Indonesian citizen start saving more. What does this imply about the supply of loanable funds and the equilibrium real interest rate? What happen to the real exchange rate?
a. the supply of loanable funds will decrease, the equilibrium of the real interest rate falls, and the real exchange rate of Rupiah will appreciates b. the demand of loanable funds increase, the supply of loanable funds will decrease, the equilibrium of the real interest rate falls, and the real exchange rate of Rupiah will appreciates
c. the supply of loanable funds will increase, the equilibrium of the real interest rate falls, and the real exchange rate of Rupiah will depreciates d. the demand of loanable funds increase, the supply of loanable funds will increase, the equilibrium of the real interest rate rise, and the real exchange rate of Rupiah will appreciates
11. Suppose that U.S government budget deficit increases, what will happen to their real interest rate, domestic investment, net capital outflow, real exchange rate of dollar and their trade balance condition? (Answer this question with the exact sequences)
b. rises, falls, falls, appreciates, falls
c. rises, falls, rises, depreciates, rises
d. falls, rises, falls, depreciates,rises
12. Which of the following is correct?
a. Over the business cycle consumption fluctuates more than investment c. During recession sales and profit tend to fall
d. Because of the government policy, Indonesia has suffered no recession in the last 20 years
13. Suppose there is a rise in tax rate. This rise would induced people to…
a. Increase consumption, shifting aggregate demand curve to the right
b. Increase consumption, aggregate demand curve moving to the right
c. Decrease consumption, shifting aggregate demand to the left
d. Decrease consumption, the aggregate demand curve moving to the left
14. Which of the following would cause prices to fall and output to rise in the short run?
a. Short run aggregate supply shifts right
b. Short run aggregate supply shifts left
c. Aggregate demand shift right
d. Aggregate demand shift right
15. The slope of aggregate demand is the result from these three reasons, except ……
a. Interest rate effect
b. Income effect
c. Wealth effect
d. Exchange rate effect
(70%) Essay
Instruction : YOU MUST done ALL of COMPULSORY questions and CHOOSE ONLY ONE OPTIONAL
questions. Compulsory Questions (@25%)1. In 2013, Indonesia’s GDP is about $1 Trillion and the value of Net Export is $2,5 Billion. In the same time, Indonesia’s real interest rate is 3% and the amount of the loanable fund is about $170 Billion. All of the variables are in equilibrium condition. (Indonesia is an open economy)
a. Draw the graph to illustrate the equilibrium condition of Indonesian Economy in 2013.
b. Let’s say, in 2014, there is a capital flight in USA and the capital move to Indonesia (Ceteris Paribus). Draw the graph to illustrate the effect of afore mentioned condition to the Indonesian economy and explain the process. nation is now in a recession. … “From a consumer’s perspective, the economy is bad, and the environment is going to be tough for a while,” said Wachovia economist Mark Vitner. … Through growth was sluggish in the last quarter of 2007 and the first quarter of 2008, the US economy has not yet shown retraction in the current slowdown. … “Whether the economy technically meets the definition of a recession matters more for economists and policy makers than it does for consumers,” said Vitner. … Of those who think the economy is in a recession, 27 percent said they believe we are in a serious recession. … Americans are less confident in the future of the economy than they were in March. The poll showed that 23 percent believe the downturn will last more than two years, up from 19 percent in March. …
CNN, July 7, 2008
a. Explain the effects of a decrease in consumer confidence on the short-‐run macroeconomic equilibrium and draw a graph to illustrate the effects. b. If the economy had been operating at a full-‐employment equilibrium, describe the effect of the fall in consumer confidence in the full-‐employment equilibrium. Draw a graph to describe.
Optional Questions (20%)
3. The table below provides information about the demand for money in Ramira. Column A is the price level, P. Column B and C show the quantity of money demanded at two values of real GDP in two years: Y 1 is $10 billion and Y 2 is $20 billion. (Remember: both real GDPs hold only if the money supply is unchanged between years)
A B C P Y 1 Y 2
1 1.0 1.5 2 1.5 2.0 3 2.0 2.5 4 2.5 3.0 5 3.0 3.5 6 3.5 4.0 7 4.0 4.5
a) If real GDP is $10 billion and the quantity of money supplied is $3 billion. Graph the money market curve! Give your analysis on what happens in Ramira if the price level: i. Exceeds $5! ii. Equals $5!
Do people buy or sell bonds? Will the price level rise or fall?
b) If the price level is $15, calculate the velocity of money in year 1!
c) The quantity of money increases by 20% in year 2. Calculate the quantity of money, the price level, real GDP, and the velocity in year 2!
4. The following datails used to analyse the purchasing power parity in the several countries using the price of CocaCola. The price data of CocaCola in 5 countries are:
Country The Price of Coca Predicted Exchange Actual Exchange Cola Rate Rate
Indonesia Rp 5000 ____/US$ Rp 11000/US$ South Korea ₩ 550 ____/US$ ₩ 1000/US$ Swiss CHF 0.6 ____/US$ CHF 0.88/US$ Czech Kč 8 ____/US$ Kč 20/US$ Brazil R$ 1.2 ____/US$ R$ 2.2/US$
Source: Example
a. For each country, calculate the predicted exchange rate of domestic currency per U.S. dollar!
b. Does the predicted exchange rate equal with the real exchange rate? If it is not equal, why does the predicted exchange rate is not equal with the real exchange rate?
5. The 1990s economic boom creating almost 24 million jobs, rising productivity gains month over month; and causing gross domestic product growth month over month and unprecedented investment in the stock market (Wall Street added $10 trillion in wealth over the decade). This prosperity, combined with the Budget Acts of 1990 and
1993 (which raised taxes and restrained spending), allowed the federal government
to go from a $290 billion deficit in 1992 to a record $236.4 billion surplus in 2000.
a. Explain how the stock boom could affect the money market and aggregate demand. What is the consequences? Draw a graph to illustrate the effects. b. When the stock boom occurs, why is the interest rate tend to have higher rate
(interest rates raised from 3% to 6%)? What is the role of the Central Bank in this situation?