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Exam 2
Macroeconomic Theory
(Due date: May 14, 10 am)
This is a take home exam. Do not communicate with others and
work on the exam by yourself.
This is an open book exam and you can study the background
materials from your textbook and
lecture materials, but you must write your own answers by
yourself.
Due date and time: May 14, 10 am. You must submit it through
blackboard only. Please do
not submit it any other way. Blackboard will not accept the
answer after the due date and time
so you must submit it by that time.
Multiple choices (1 point each)
1. What is ‘the’ main monetary policy tool available to the
Federal Reserve (recall MP curve)?
a. reserve rate
b. discount rate
c. federal funds rate
d. printing money
e. mortgage rate
2. The federal funds rate is:
a. equal to the rate of inflation.
b. the interest rate at which banks borrow from the Federal
Reserve.
c. the interest rate paid from one bank to another for overnight
loans.
d. an interest rate that is some fixed amount above the prime
lending rate.
e. the return to stock markets over the long term.
3. Which of the following is the Fisher equation?
a.
d.
b. e.
c.
4. Consider the economy presented in Figure 12.2. If
the stock market drops sharply, there is a loss
in consumer and investor confidence and the economy moves
from __________. To prevent a
__________, the Fed __________, and the economy moves from
__________.
a. point a to d; recession; lowers interest rates; point d to b
b. point c to b; bubble; raises interest rates; point b to c
c. point d to c; recession; lowers interest rates; point c to b
d. point a to d; recession; lowers interest rates; point d to c
e. Not enough information is given.
5. The Phillips curve we specified assumes that inflation
expectations are:
a. Rational d. equal to zero
b. Adaptive e. None of these answers are correct.
c. always wrong
6. According to the Phillips curve, if current output equals
potential output (with no inflation shock):
a. inflation is steady d. unemployment is negative
b. inflation fluctuates a lot e. the economy is booming
c. unemployment is zero
7. According to the Phillips curve, if current output is above
potential output (with no inflation shock):
a. inflation falls d. inflation is constant
b. inflation rises e. tax rates rise
c. unemployment falls
8. According to the Phillips curve, if current output is below
potential output (with no inflation shock):
a. inflation falls d. inflation is constant
b. inflation rises e. tax rates rise
c. unemployment falls
Figure 12.4: Phillips Curve
9. Consider the Phillips curve in Figure 12.4. At point b, the
economy is ________, and at point a, the
economy is ________.
a. in recession; booming
b. in recession; in its steady state
c. in recession; in recession
d. booming; in recession
e. in its steady state; in recession
10. In the Phillips curve, ∆�� = �̅��̃�� + �̅�, �̅�
measures:
a. a price shock
b. how sensitive inflation is to interest rates
c. how sensitive inflation is to demand conditions
d. how sensitive inflation is to aggregate supply conditions
e. how sensitive inflation is to price shocks
11. In the Phillips curve ∆�� = �̅��̃�� + �̅�, �̅�
measures:
a. a demand shock
b. an inflation shock
c. how sensitive inflation is to demand conditions
d. how sensitive inflation is to aggregate supply conditions
e. None of the above
Figure 12.5: Phillips Curve
12. Starting from any point in the Phillips curve in Figure 12.5,
an unexpected increase in oil prices will
move the economy from (everything else is constant):
a. point a to b d. point a to c
b. point c to b e. Not enough information is given.
c. point b to c
Short answer questions
Please write clearly. If I cannot understand your writing, I
cannot give you the credits for the
questions.
1. Your day as the chair of the FED: Suppose you are appointed
as the chair of the US Federal
Reserve. “With the sole goal of stabilizing output”, explain how
and why you would change the
interest rate in response to the following shocks. Show the
effects on the economy in the short
run using the IS-MP diagram. Be sure to discuss what changes
in the model specifically. Provide
detailed intuitive explanation in words as well. (You can
assume that the economy, before the
shock, is at the benchmark point.) (12 points)
A. Firms become pessimistic about the state of the economy and
hence decrease the investment.
(Note that this happens initially without any change in the
interest rate).
B. Suppose some of Latin American economies succumb to a
recession and significantly reduce
their demand for the U.S. goods.
2. Your day as the chair of the FED: Suppose you are appointed
as the chair of the US Federal
Reserve. “With the sole goal of stabilizing inflation at a low
level”, explain how and why you
would change the interest rate in response to the following
shock. Show the effects on the
economy in the short run using the US IS-MP-and Philips curve
diagrams. Provide detailed
intuitive explanation in words as well. In your analysis, be sure
to discuss how FED can
stabilize the inflation at the level that they desire. (You can
assume that the economy, before the
shocks, is at the benchmark point.) (10 points).
Suppose France experiences a boom and significantly increase
their demand for the U.S. goods.
Rachel Santos posted May 9, 2020 8:53 PM
Subscribe
· How might the projected changes affect an organization’s
vision, mission, and values?
Organizations who seek to improve, to include newly start-up
businesses, should consider slightly modifying their vision,
mission and values as needed. The mission and vision
statements set the organization’s groundwork so any drastic
changes may want to be thought out considerately. I do not
believe that changes will radically affect it in any way unless
management decides to strategically re-vamp the organization.
If that happens, communicating it clearly to the workforce is
what will drive the organization success.
· Is it possible for an organization to successfully operate when
its vision, mission and values are ever-changing?
I do believe that it is possible for an organization to
successfully operate when its vision, mission, and values are
continuously changing. Pearson (2014) explains the term
commitment strategy which is when an organization pursues to
“build up a strong commitment among employees through the
commonality of interest between employers and employees”. As
long as the employees and critical key players in the
organization are kept in the loop of these changes, tasks, and
objectives to meet and support the company’s mission, the right
people and teams will adapt and refocus their energies
accordingly because they too understand the importance of the
business moving forward in the right direction.
· Will vision, mission, and values become obsolete and be
replaced? If so, by what?
I do not feel that vision, mission, and values will be become
obsolete; however, as mentioned by Chakraverty (2018) it is
critical to allow employees to make the maximum contribution
and “create a vision and values that inspire, motivate, and drive
the right day-to-day behaviors”. A company’s mission, vision
and values would mean more if employees were empowered to
critique and add their personal values to embody meaningful
values that the workforce can relate to.
Chakraverty, J. (2018). Company Vision and Values: Do They
Still Matter? Forbes. Retrieved from
https://www.forbes.com/sites/voicesfromeurope/2018/03/28/com
pany-vision-and-values-do-they-still-matter/#251cf0a8217f
Pearson India. (2014, June 14). How can Strategic Human
Resource Management (SHRM) help in modern organisational
growth? [Video file]. Retrieved from
https://www.youtube.com/watch?v=jWdovBCWTF0.

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Exam 2 Macroeconomic Theory (Due date May 14, 10 am.docx

  • 1. Exam 2 Macroeconomic Theory (Due date: May 14, 10 am) This is a take home exam. Do not communicate with others and work on the exam by yourself. This is an open book exam and you can study the background materials from your textbook and lecture materials, but you must write your own answers by yourself. Due date and time: May 14, 10 am. You must submit it through blackboard only. Please do not submit it any other way. Blackboard will not accept the answer after the due date and time so you must submit it by that time. Multiple choices (1 point each) 1. What is ‘the’ main monetary policy tool available to the Federal Reserve (recall MP curve)? a. reserve rate
  • 2. b. discount rate c. federal funds rate d. printing money e. mortgage rate 2. The federal funds rate is: a. equal to the rate of inflation. b. the interest rate at which banks borrow from the Federal Reserve. c. the interest rate paid from one bank to another for overnight loans. d. an interest rate that is some fixed amount above the prime lending rate. e. the return to stock markets over the long term. 3. Which of the following is the Fisher equation? a. d.
  • 3. b. e. c. 4. Consider the economy presented in Figure 12.2. If the stock market drops sharply, there is a loss in consumer and investor confidence and the economy moves from __________. To prevent a __________, the Fed __________, and the economy moves from __________. a. point a to d; recession; lowers interest rates; point d to b b. point c to b; bubble; raises interest rates; point b to c c. point d to c; recession; lowers interest rates; point c to b d. point a to d; recession; lowers interest rates; point d to c e. Not enough information is given. 5. The Phillips curve we specified assumes that inflation
  • 4. expectations are: a. Rational d. equal to zero b. Adaptive e. None of these answers are correct. c. always wrong 6. According to the Phillips curve, if current output equals potential output (with no inflation shock): a. inflation is steady d. unemployment is negative b. inflation fluctuates a lot e. the economy is booming c. unemployment is zero 7. According to the Phillips curve, if current output is above potential output (with no inflation shock): a. inflation falls d. inflation is constant b. inflation rises e. tax rates rise c. unemployment falls
  • 5. 8. According to the Phillips curve, if current output is below potential output (with no inflation shock): a. inflation falls d. inflation is constant b. inflation rises e. tax rates rise c. unemployment falls Figure 12.4: Phillips Curve 9. Consider the Phillips curve in Figure 12.4. At point b, the economy is ________, and at point a, the economy is ________. a. in recession; booming b. in recession; in its steady state c. in recession; in recession d. booming; in recession e. in its steady state; in recession
  • 6. 10. In the Phillips curve, ∆�� = �̅��̃�� + �̅�, �̅� measures: a. a price shock b. how sensitive inflation is to interest rates c. how sensitive inflation is to demand conditions d. how sensitive inflation is to aggregate supply conditions e. how sensitive inflation is to price shocks 11. In the Phillips curve ∆�� = �̅��̃�� + �̅�, �̅� measures: a. a demand shock b. an inflation shock c. how sensitive inflation is to demand conditions d. how sensitive inflation is to aggregate supply conditions e. None of the above
  • 7. Figure 12.5: Phillips Curve 12. Starting from any point in the Phillips curve in Figure 12.5, an unexpected increase in oil prices will move the economy from (everything else is constant): a. point a to b d. point a to c b. point c to b e. Not enough information is given. c. point b to c Short answer questions Please write clearly. If I cannot understand your writing, I cannot give you the credits for the
  • 8. questions. 1. Your day as the chair of the FED: Suppose you are appointed as the chair of the US Federal Reserve. “With the sole goal of stabilizing output”, explain how and why you would change the interest rate in response to the following shocks. Show the effects on the economy in the short run using the IS-MP diagram. Be sure to discuss what changes in the model specifically. Provide detailed intuitive explanation in words as well. (You can assume that the economy, before the shock, is at the benchmark point.) (12 points) A. Firms become pessimistic about the state of the economy and hence decrease the investment. (Note that this happens initially without any change in the interest rate). B. Suppose some of Latin American economies succumb to a recession and significantly reduce their demand for the U.S. goods. 2. Your day as the chair of the FED: Suppose you are appointed as the chair of the US Federal
  • 9. Reserve. “With the sole goal of stabilizing inflation at a low level”, explain how and why you would change the interest rate in response to the following shock. Show the effects on the economy in the short run using the US IS-MP-and Philips curve diagrams. Provide detailed intuitive explanation in words as well. In your analysis, be sure to discuss how FED can stabilize the inflation at the level that they desire. (You can assume that the economy, before the shocks, is at the benchmark point.) (10 points). Suppose France experiences a boom and significantly increase their demand for the U.S. goods. Rachel Santos posted May 9, 2020 8:53 PM Subscribe
  • 10. · How might the projected changes affect an organization’s vision, mission, and values? Organizations who seek to improve, to include newly start-up businesses, should consider slightly modifying their vision, mission and values as needed. The mission and vision statements set the organization’s groundwork so any drastic changes may want to be thought out considerately. I do not believe that changes will radically affect it in any way unless management decides to strategically re-vamp the organization. If that happens, communicating it clearly to the workforce is what will drive the organization success. · Is it possible for an organization to successfully operate when its vision, mission and values are ever-changing? I do believe that it is possible for an organization to successfully operate when its vision, mission, and values are continuously changing. Pearson (2014) explains the term commitment strategy which is when an organization pursues to “build up a strong commitment among employees through the commonality of interest between employers and employees”. As long as the employees and critical key players in the organization are kept in the loop of these changes, tasks, and objectives to meet and support the company’s mission, the right people and teams will adapt and refocus their energies accordingly because they too understand the importance of the business moving forward in the right direction. · Will vision, mission, and values become obsolete and be replaced? If so, by what? I do not feel that vision, mission, and values will be become obsolete; however, as mentioned by Chakraverty (2018) it is critical to allow employees to make the maximum contribution and “create a vision and values that inspire, motivate, and drive
  • 11. the right day-to-day behaviors”. A company’s mission, vision and values would mean more if employees were empowered to critique and add their personal values to embody meaningful values that the workforce can relate to. Chakraverty, J. (2018). Company Vision and Values: Do They Still Matter? Forbes. Retrieved from https://www.forbes.com/sites/voicesfromeurope/2018/03/28/com pany-vision-and-values-do-they-still-matter/#251cf0a8217f Pearson India. (2014, June 14). How can Strategic Human Resource Management (SHRM) help in modern organisational growth? [Video file]. Retrieved from https://www.youtube.com/watch?v=jWdovBCWTF0.