# DEPARTMENT OF ECONOMICS DECEMBER 2, 2011 SAN JOSE STATE UNIVERSITY

```DEPARTMENT OF ECONOMICS
SAN JOSE STATE UNIVERSITY
MASTER’S COMPREHENSIVE EXAMINATION
DECEMBER 2, 2011
6:00 P.M. TO 9:30 P.M.
PROCTOR: J. HUMMEL
INSTRUCTIONS:
1.
Answer ONLY the specified number of questions from the options provided in each
section. Do not answer more than the required number of questions. Each section takes
one hour.
2.
Your answers must be on the paper provided. No more than one answer per page. Do not
answer two questions on the same sheet of paper.
3.
If you use more than one sheet of paper for a question, write “Page 1 of 2” and
“Page 2 of 2.”
4.
Write ONLY on one side of each sheet. Use only pen. Answers in pencil will be
disqualified.
5.
Write ------ END ----- at the end of each answer.
6.
Write your exam identification number in the upper right-hand corner of each sheet of
paper.
7.
Write the question number in the upper right-hand corner of each sheet of paper.
Section 2: Macroeconomics, Monetary Theory, and Econometrics—Answer One Question.
2A. (Econ 202) Discuss gross domestic product (GDP). What does it measure? Distinguish (a)
between nominal GDP and real GDP, (b) between GDP and gross national product (GNP), and
(c) between GNP, net national product, and disposable personal income. What are the four
expenditure components of GDP, which is the largest, and which is the most volatile? Then
elaborate on some of GDP’s limitations and shortcomings. What kinds of production does GDP
not capture, and why is it not necessarily a good proxy for economic well being? Give at least
one example of where GDP per capita goes down but people on average are better off.
2B. (Econ 235) Draw a Bailey (or monetary Laffer) curve, clearly labeling both axes and the
maximum rate of real seigniorage that a government can generate in the long-run. What are the
diagram’s simplifying assumptions? Now explain in words why the point you indicated is indeed
the maximum. Then illustrate on the graph how hyperinflation might get started, again explaining
in words the process you are depicting.
(over)
-1-
DEPARTMENT OF ECONOMICS
SAN JOSE STATE UNIVERSITY
MASTER’S COMPREHENSIVE EXAMINATION
DECEMBER 2, 2011
6:00 P.M. TO 9:30 P.M.
PROCTOR: J. HUMMEL
2C. (Econ 203) Consider the following sample semi-log regression model:
-----------------------------------------------------------------------------ln(hourly wage)
Coef.
-------------+---------------------------------------------------------------yrs. of education
0.11
yrs of experience
0.01
married = 1
0.14
female = 1
-.26
metropolitan area = 1
0.18
Black = 1
-.08
Asian = 1
-.07
lives west region = 1
0.01
lives south region = 1
-.04
constant
1.46
-----------------------------------------------------------------------------a. What are the necessary assumptions to estimate the model using ordinary least squares?
b. Provide an interpretation of education coefficient based on the semi-log form. Do the same for
married coefficient.
c. Describe the base group in interpreting the dummy variables. Estimate the log wage for a recent
college graduate (educ = 16) with no work experience that is a married female living in a metropolitan
area in the south.
d. Demonstrate and explain one way to test the hypothesis that the return from living in the west
region equals the return from living in the south region.
e. Draw a graph using residuals that would suggest heteroskedasticity with respect to the married
variable. State and explain the steps of a test for determining heteroskedasticity.
-2-
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