代写SESS2006 European Macroeconomics BA EXAMINATION 2016代写留学生Matlab语言

Module: SESS2006 European Macroeconomics

BA EXAMINATION 2016 (75% of total assessment)

Section A: Answer all questions

(5 points for each question, 30 points in total)

State whether the following statements are true, false or uncertain and provide a short explanation carefully justifying your answer. Marks are only awarded for the justification (argument, algebra, graphs etc.) that you provide.

1.   Official measures of the budget deficit are constructed as the difference between government spending and taxes net of transfers.

2.   The introduction of expectations in the goods market model makes the IS curve flatter, although it is still downward slopping.

3.   There is so much uncertainty about the effects of monetary policy that we would be better off not using it.

4.   The central bank can increase the supply of money by selling bonds in the bonds market.

5.   The only reason that debt crisis occur in the periphery countries in Eurozone is that the governments of these countries have accumulated too much public debt.

Section B: Answer all questions

(40 points in total, 20 points for each)

1.   AD-AS model.

The Wage Setting relation is assumed to be

W = Pe (1 − αU + z)

where W is the wage level, Pe is the expected price level, U is the unemployment rate and z is the level of unemployment benefits. α is a measure of wage flexibility – the higher α is, the greater is the response of the wage to a change in the unemployment   rate U.

The price setting is assumed to be:

P = (1+μ) W

where μ is the firms’ markup and P is the actual price level.

(1)What is the natural level of unemployment given the wage setting and price setting equations?

(2) Suppose µ=0.03 and z=0.03. What is the natural rate of unemployment if α=1? if α=2? What is the relation between α and the natural rate of unemployment? Interpret your answer.

(3)  Suppose that as a result of an oil price increase, markup µ increases to 0.06. What is the new natural rate of unemployment if α=1? if α=2? Would an increase in wage flexibility tend to weaken the adverse effect of an oil price increase?

(4) Since the financial crises in 2008-2009, some policymakers in European countries

claim that structural reform. (i.e. a more flexible labour market and product market) is the key solution for European countries to get out of the stagnation of economic growth and achieve   higher employment rate. Do you agree with the claim? Please use AS-AD graph to discuss in details. (Hint: as we have discussed in class the economy is in a liquidity trap)

2.   Growth model

Suppose that the economy’s production function is

Y = K 0.5 (AN)0.5

where output Y depends on both capital and labour, K and N, and on the state of technology, A.  Suppose that the saving rate, s, is equal to 16%, and that the rate of depreciation, δ, is

equal to 10%. Suppose further that the number of workers grow at 2% per year and that the rate of technological progress is 8% per year.

(1) Please find the steady-state values of the variables listed in below.

a)   The capital stock per effective worker.

b)  Output per effective worker.

c)   The growth rate of output per effective worker.

d)  The growth rate of output per worker.

e)   The growth rate of output.

(2) Suppose now that the government has implemented some economic reforms and the long-term saving rate increase from 16% to 20%, what change(s) will occur? Please recompute the answers to question (1).

Section C: Answer only one question. (30 points)

1.    “European Central Bank should not have used taxpayers’ money to provide liquidity  and to save those European banks and those Eurozone countries which were in trouble during the financial crises period.” Please critically discuss this statement.

2.   When a central bank announces a target inflation rate, it has incentive to deviate from its target. Please use the Taylor rule and the Barro-Gordon model to discuss this statement and its implications on inflation and unemployment.