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Midterm and Final Exams |
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Final Exam (Dec 18) |
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Problems(PDF60KB) |
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Multiple-Choice Questions(answers) |
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| 1 |
(c) |
2 |
(d) |
| 3 |
(e) |
4 |
(d) |
| 5 |
(a) |
6 |
(a) |
| 7 |
(e) |
8 |
(a) |
| 9 |
(d) |
10 |
(e) |
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Essay Questions (hints) |
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| 1 |
(1) |
The cashflow of this loan is:
Then, applying the formula we learned in Lecture 7, we obtain the equation:
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| (2) |
The maturity of a 10-year loan is twice longer, so you have only to verify
that  is larger than a half of  .
First, set up two equations noting that the interest rates are the same.
Solve for and and you obtain:
Then, define  and as:
Rewrite and , and we obtain:
Noting that A > B,
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| 2 |
See Lecture 9. |
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| 3 |
(1) |
See Lecture 9. |
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(2) |
As we assumed in Lecture 8, a country's trade balance is affected by its
GDP, the exchange rate, and the other country's GDP. An increase in the
counry's GDP deteriorates its trade balance, while an increase in the other
country's GDP improves our trade balance. A depreciation of our currency
improves our trade balance.
As we've verified in the question (1), an increase in the government demand
raises the GDP and appreciates the currency. Then, the trade balance deteriorates.
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Midterm Exam (Nov 13) |
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Problems(PDF49KB) |
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Multiple-Choice Questions(answers) |
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| 1 |
(b) |
2 |
(a) |
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(d) |
4 |
(b) |
| 5 |
(c) |
6 |
(b) |
| 7 |
(d) |
8 |
(d) |
| 9 |
(c) |
10 |
(b) |
| 11 |
(d) |
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Essay Questions (hints) |
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| 1 |
- CA = - (FA + KA) = Changes in net foreign wealth
- A large current account deficit means a large increase in net foreign liabilities.
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| 2 |
- In New York, a dollar is exchanged for 180 yens.
- In London a dollar is exchanged for 0.6 pounds, and in Tokyo a pound is
exchanged for 180 yens. Therefore, a dollar can be exchanged for 108 yens.
- How can you take advantage of the difference between \180/$ and \108/$?
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| 3 |
- Derive the indentity: S-I = (G-T) + (X-M)
- The identity implies that if S-I is constant, an increase in G-T is always
accompanied by a decrease in (X-M) by the same amount.
- It means that (a decrease in) a trade deficit is the other side of (an incease in) a government budget deficit, so "a twin brother."
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