1st In-Class-Quiz 2020W vA w Answers Noon

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Apr 3, 2024

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Page 2 of 6 Midterm Exam 2020-WINTER-QUIZ 1 – version A The Global Economy (MGMT 406) NAME: ________________________________________________ You have 40 minutes for the exam, 1.00pm-1.40pm Midterm is out of 30 points: 7 MC questions for 14 points, plus 16 points for short non-MC questions Please read ALL the information provided in the questions. The exam is “closed” everything – just you, your brain and some paper! Good luck!
Page 3 of 6 PART I: Multiple Choice [14 points, 2 points for each of 7 questions] 1. The gains from trade are __________ the more similar the productive capacities of a country are to the rest of the world. a) smaller b) larger c) unchanged Answer-Key: As discussed in class, the more different the productive capacities of country from the productive capacities of the rest of the world, the larger the gains from trade 2. Imagine an earthquake strikes an economy. The earthquake has no death toll but destroys capital, what will most probably happen with the marginal product of labor? a) Increase b) Decrease c) Stay the same Answer-Key: Remember that capital (labor) “likes” labor (capital). The decrease in the stock of capital will reduce the marginal product of labor 3. Consider the 2-sector 2-factor model discussed in class (i.e. 2-sectors: computers and textiles, 2-factors: capital and labor, computers is the capital intensive sector). Suppose positive changes to the educational system increases the productivity of labor so that the productive value of a unit of L is increased. What would be the effect on the PPF? a) The PPF will stay the same b) The PPF will expand for both computers and textiles, but relatively more for textiles c) The PPF will expand for both computers and textiles, but relatively more for computers d) The PPF will contract for both computers and textiles, but relatively more for textiles e) The PPF will contract for both computers and textiles, but relatively more for computers Answer-Key: The question frames the increase in labor productivity to make clear it’s like an increase in L. Because textiles is the labor intensive sector, this change affects the textiles sector proportionally more.
Page 4 of 6 4. Consider the Hidalgo-Hausman type “product-trees.” Which of the following statements is false? a. The size of a node reflects in some way an industry’s economic importance b. Nodes in manufactured products are more connected than nodes in commodity- based sectors c. A larger distance between two connected nodes reflects that it’s harder for a country to move from one into the other. Answer-Key: distance between two nodes that are connected is just a visual aid to make a pretty tree, nothing more. 5. Of the 3 different ways in which GDP can be decomposed, which two are closest to how GDP is actually measured? a. the Income Approach, the Value Added Approach b. the Income Approach, the Expenditure Approach c. the Value Added Approach, the Expenditure Approach Answer-Key: See class-notes and class-discussion in week 1. 6. Consider the Standard Growth Model that we studied in class (i.e. 𝑌𝑌 = 𝐴𝐴𝐾𝐾 𝛼𝛼 𝐿𝐿 1−𝛼𝛼 ). If output growth is 9.5%, productivity growth is 2%, capital growth is 10%, and labor growth is 5%, what is the “capital share” alpha? a) 0.2 b) 0.3 c) 0.4 d) 0.5 Answer-Key: You need to use growth accounting: 9.5 = 𝛼𝛼 *10 + (1- 𝛼𝛼 )*5 + 2 9.5 = 𝛼𝛼 *5 + 7 𝛼𝛼 = 0.5 7. Which of the following series may have a strong influence on TFP estimates because it is not adequately captured in growth accounting? a) The Workforce b) Hours worked c) Capital d) Whether a country’s is a democracy Answer-Key: Capital is extremely hard to measure and so greatly affects productivity estimates. Take for example, the case we reviewed in class “The Tyranny of Numbers” (Note:
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