QUESTION 1Everything else equal, the Phillips-curve in a country will shift upwards whenthe unemployment rate fallsthe central bank cuts interest ratesoil prices risethe government reduces tax rates on labourQUESTION 2Consider a country with a flexible exchange rate. If the central bank of this country raises its interest rate by 0.5%-points, whereas observers had anticipated an increase of only 0.25%-points, one can expect that:Bond prices and stock prices rise, the country’s currency depreciatesBond prices rise, stock prices fall, the country’s currency appreciatesBond prices fall, stock prices rise, the country’s currency depreciatesBond prices and stock prices fall, the country’s currency appreciatesQUESTION 3We asked five students to give us three possible sources of an increase of the monetary base in the economy. Only one of the students came up with a completely correct list. This list included:an increase in central bank lending to banks, a purchase of government bonds by the central bank, a purchase of foreign currency by the central bank.an increase in central bank lending to banks, a sale of government bonds by the central bank, a sale of foreign currency by the central bank.a decrease in central bank lending to banks, a purchase of government bonds by the central bank, a purchase of foreign currency by the central bankan increase in central bank lending to banks, an increase in bank lending to firms and households, a purchase of government bonds by the central bankQUESTION 4Denmark has chosen a fixed exchange rate for the Danish krone against the euro. At some point in time, the value of the krone reaches the limit of the permitted fluctuation band. The market supply of krone is then 280, while market demand is 230. What will happen?The Danish central bank intervenes on the exchange market and buys Danish krone worth 50. The money stock in Denmark will fall.The Danish central bank intervenes on the exchange market and buys Danish krone worth 50. The money stock in Denmark will rise.The Danish central bank intervenes on the exchange market and sells Danish krone worth 50. The money stock in Denmark will fall.The Danish central bank intervenes on the exchange market and sells Danish krone worth 50. The money stock in Denmark will rise.QUESTION 5Imagine the following simple Keynesian macroeconomic model for a closed economy.TD = C + Ip + G (total demand)C = C0 + YD (aggregate household consumption)YD = Y − T (aggregate household disposable income)Ip = I0 + aY − bR (aggregate planned investment)Y = TD (output, equilibrium condition)BB = T – G (government budget balance)With:G government consumption, T taxes, R real interest rate (exogenous variables)C0) and I0 autonomous consumption and investment0 G.total demand increases, and equilibrium output rises. The rise of output is stronger the higher the households’ marginal propensity to consume.total demand increases, and equilibrium output rises. The rise of output is stronger the lower the households’ marginal propensity to consume. QUESTION 1Everythingelse equal, the Phillips-curve in a country will shift upwards whenO the unemployment rate fallsO the central bank cuts interest ratesO oil prices riseO the government reduces tax rates on labourQUESTION 2Consider a country with a flexible exchange rate. If the central bank of this country raises its interest rate by 0.5%-points, whereas observers had anticipated an increase of only 0.25%-points, one can expect that:O Bond prices and stock prices rise, the country's currency depreciatesO Bond prices rise, stock prices fall, the country's currency appreciatesO Bond prices fall, stock prices rise, the country's currency depreciatesO Bond prices and stock prices fall, the country's currency appreciatesQUESTION 3We asked five students to give us three possible sources of an increase of the monetary base in the economy. Only one of the students came up with a completely correct list. This list included:O an increase in central bank lending to banks, a purchase of government bonds by the central bank, a purchase of foreign currency by the central bank.O an increase in central bank lending to banks, a sale of government bonds by the central bank, a sale of foreign currency by the central bank.O a decrease in central bank lending to banks, a purchase of government bonds by the central bank, a purchase of foreign currency by the central bankO an increase in central bank lending to banks, an increase in bank lending to firms and households, a purchase of government bonds by the central bankQUESTION 4Denmark has chosen a fixed exchange rate for the Danish krone against the euro. At some point in time, the value of the krone reaches the limit of the permitted fluctuation band. The market supply of krone is then 280, while market demand is 230. What will happen?O The Danish central bank intervenes on the exchange market and buys Danish krone worth 50. The money stock in Denmark will fall.O The Danish central bank intervenes on the exchange market and buys Danish krone worth 50. The money stock in Denmark will rise.O The Danish central bank intervenes on the exchange market and sells Danish krone worth 50. The money stock in Denmark will fall.O The Danish central bank intervenes on the exchange market and sells Danish krone worth 50. The money stock in Denmark will rise.QUESTION 5Imagine the following simple Keynesian macroeconomic model for a closed economy.TD = C + Ip + G (total demand)C = Co + Yo (aggregate household consumption)YD = Y - T (aggregate household disposable income)Ip IoaYbR (aggregate planned investment)Y = TD (output, equilibrium condition)BB = T - G (government budget balance)With:G government consumption, T taxes, R real interest rate (exogenous variables)Co) and 10 autonomous consumption and investment0 0 constant parametersDerive the equation for output and answer the following question. If the government in this model simultaneously increases its consumption G and its taxes T by the same amount, thenO total demand decreases, and equilibrium output declines.O total demand decreases, and equilibrium output declines, but only if C G.O total demand increases, and equilibrium output rises. The rise of output is stronger the higher the households' marginal propensity to consume.O total demand increases, and equilibrium output rises. The rise of output is stronger the lower the households' marginal propensity to consume.

Question

QUESTION 1Everything else equal, the Phillips-curve in a country will shift upwards whenthe unemployment rate fallsthe central bank cuts interest ratesoil prices risethe government reduces tax rates on labourQUESTION 2Consider a country with a flexible exchange rate. If the central bank of this country raises its interest rate by 0.5%-points, whereas observers had anticipated an increase of only 0.25%-points, one can expect that:Bond prices and stock prices rise, the country’s currency depreciatesBond prices rise, stock prices fall, the country’s currency appreciatesBond prices fall, stock prices rise, the country’s currency depreciatesBond prices and stock prices fall, the country’s currency appreciatesQUESTION 3We asked five students to give us three possible sources of an increase of the monetary base in the economy. Only one of the students came up with a completely correct list. This list included:an increase in central bank lending to banks, a purchase of government bonds by the central bank, a purchase of foreign currency by the central bank.an increase in central bank lending to banks, a sale of government bonds by the central bank, a sale of foreign currency by the central bank.a decrease in central bank lending to banks, a purchase of government bonds by the central bank, a purchase of foreign currency by the central bankan increase in central bank lending to banks, an increase in bank lending to firms and households, a purchase of government bonds by the central bankQUESTION 4Denmark has chosen a fixed exchange rate for the Danish krone against the euro. At some point in time, the value of the krone reaches the limit of the permitted fluctuation band. The market supply of krone is then 280, while market demand is 230. What will happen?The Danish central bank intervenes on the exchange market and buys Danish krone worth 50. The money stock in Denmark will fall.The Danish central bank intervenes on the exchange market and buys Danish krone worth 50. The money stock in Denmark will rise.The Danish central bank intervenes on the exchange market and sells Danish krone worth 50. The money stock in Denmark will fall.The Danish central bank intervenes on the exchange market and sells Danish krone worth 50. The money stock in Denmark will rise.QUESTION 5Imagine the following simple Keynesian macroeconomic model for a closed economy.TD = C + Ip + G (total demand)C = C0 + YD (aggregate household consumption)YD = Y − T (aggregate household disposable income)Ip = I0 + aY − bR (aggregate planned investment)Y = TD (output, equilibrium condition)BB = T – G (government budget balance)With:G government consumption, T taxes, R real interest rate (exogenous variables)C0) and I0 autonomous consumption and investment0 < a, c, a+c < 1, b > 0 constant parametersDerive the equation for output and answer the following question. If the government in this model simultaneously increases its consumption G and its taxes T by the same amount, thentotal demand decreases, and equilibrium output declines.total demand decreases, and equilibrium output declines, but only if C > G.total demand increases, and equilibrium output rises. The rise of output is stronger the higher the households’ marginal propensity to consume.total demand increases, and equilibrium output rises. The rise of output is stronger the lower the households’ marginal propensity to consume. QUESTION 1Everythingelse equal, the Phillips-curve in a country will shift upwards whenO the unemployment rate fallsO the central bank cuts interest ratesO oil prices riseO the government reduces tax rates on labourQUESTION 2Consider a country with a flexible exchange rate. If the central bank of this country raises its interest rate by 0.5%-points, whereas observers had anticipated an increase of only 0.25%-points, one can expect that:O Bond prices and stock prices rise, the country's currency depreciatesO Bond prices rise, stock prices fall, the country's currency appreciatesO Bond prices fall, stock prices rise, the country's currency depreciatesO Bond prices and stock prices fall, the country's currency appreciatesQUESTION 3We asked five students to give us three possible sources of an increase of the monetary base in the economy. Only one of the students came up with a completely correct list. This list included:O an increase in central bank lending to banks, a purchase of government bonds by the central bank, a purchase of foreign currency by the central bank.O an increase in central bank lending to banks, a sale of government bonds by the central bank, a sale of foreign currency by the central bank.O a decrease in central bank lending to banks, a purchase of government bonds by the central bank, a purchase of foreign currency by the central bankO an increase in central bank lending to banks, an increase in bank lending to firms and households, a purchase of government bonds by the central bankQUESTION 4Denmark has chosen a fixed exchange rate for the Danish krone against the euro. At some point in time, the value of the krone reaches the limit of the permitted fluctuation band. The market supply of krone is then 280, while market demand is 230. What will happen?O The Danish central bank intervenes on the exchange market and buys Danish krone worth 50. The money stock in Denmark will fall.O The Danish central bank intervenes on the exchange market and buys Danish krone worth 50. The money stock in Denmark will rise.O The Danish central bank intervenes on the exchange market and sells Danish krone worth 50. The money stock in Denmark will fall.O The Danish central bank intervenes on the exchange market and sells Danish krone worth 50. The money stock in Denmark will rise.QUESTION 5Imagine the following simple Keynesian macroeconomic model for a closed economy.TD = C + Ip + G (total demand)C = Co + Yo (aggregate household consumption)YD = Y - T (aggregate household disposable income)Ip IoaYbR (aggregate planned investment)Y = TD (output, equilibrium condition)BB = T - G (government budget balance)With:G government consumption, T taxes, R real interest rate (exogenous variables)Co) and 10 autonomous consumption and investment0 0 constant parametersDerive the equation for output and answer the following question. If the government in this model simultaneously increases its consumption G and its taxes T by the same amount, thenO total demand decreases, and equilibrium output declines.O total demand decreases, and equilibrium output declines, but only if C > G.O total demand increases, and equilibrium output rises. The rise of output is stronger the higher the households' marginal propensity to consume.O total demand increases, and equilibrium output rises. The rise of output is stronger the lower the households' marginal propensity to consume.

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