Macroeconomic Principles, JMPG14, Spring 2022
Exam information
General exam rules at Jönköping University apply.
The exam consists of 8 tasks.
The first task consists of multiple-choice questions. Please always choose one answer.
The maximum number of points achievable is 90.
The first task yields 20 points, and the remaining 7 tasks yield 10 points each.
The pass mark is 60% of the total.
The following aids are permitted: dictionary and online calculator (see links below).
Name of the responsible teacher: Benjamin Larin
The responsible teacher is not present during the examination but can be reached under +46 36-10 1165 from
14:00 to 19:00.
Good luck!
1(a)
The following table contains macroeconomic variables in the rows and asks you about some stylized
business-cycle facts. Select whether a respective variable is less volatile than, equally volatile, or more volatile
than GDP.
Please match the values:
More volatile than GDP
Less volatile than GDP
As volatile as GDP
Investment
Durable consumption
Total hours worked
Non-durable consumption
Maximum marks: 2
1(b)
The stock of money in the economy
is held by the central bank.
is more than the currency in circulation.
is the same as the currency in circulation
is a flow variable.
Maximum marks: 2
1/15
1(c)
Consider an economy with a labor force of 5 million individuals and 4 million employed individuals. The
number of potential workers is 10 million.
In this economy,
the unemployment rate is 10%, and the labor force participation rate is 50%.
the unemployment rate is 20%. and the labor force participation rate is 5%.
the unemployment rate is 10%, and the labor force participation rate is 5%.
the unemployment rate is 20%, and the labor force participation rate is 50%.
Maximum marks: 2
1(d)
If the government increases military expenditures, then all else being equal,
government debt will decrease.
taxes will decrease.
government expenditures on education will increase.
government debt will increase.
Maximum marks: 2
1(e)
A typical resident of the country of Tysklandia consumes a simple basket of goods consisting of beer and
sausages. The base year is 2000. The base year's basket contains 1 liter of beer and 2 sausages. The prices
are given in the table.
Beer (€ per liters)
Sausage (€ per sausage)
2000
1
2
2001
2
3
In 2001, the inflation rate in Tsysklandia was equal to
6 percent.
0.6 percent.
60 percent.
160 percent.
Maximum marks: 2
2/15
1(f)
One of the activities performed by a central bank is
processing interbank transfers.
maturity transformation.
identifying profitable lending opportunities.
enforcing labor market regulations.
Maximum marks: 2
1(g)
The following table represents two economies that are trading two goods. It shows how many hours it takes to
produce a bottle of wine or a car.
Wine
Cars
France
2
1
Italy
3
4
Choose the right statement.
France has a comparative advantage in the production of wine.
France has a comparative advantage in the production of cars.
Italy has a comparative advantage in the production of cars.
Italy has an absolute advantage in the production of wine.
Maximum marks: 2
1(h)
The government raises its expenditures by SEK 15 billion. This increases household consumption by SEK 10
billion, reduces investment by SEK 7 billion, and leaves net exports unaffected.
The government expenditure multiplier is equal to
1.20
1.00
0.20
0.15
Maximum marks: 2
3/15
1(i)
An investment opportunity offers a nominal interest rate of 0.1%. The inflation rate is equal to 3.1%.
The real interest rate is equal to
-3.1%.
-3.0%.
3.0%.
-2.9%.
Maximum marks: 2
1(j)
The accounting system requires that the current account and the financial account sum to
0.
1.
GDP.
100.
Maximum marks: 2
4/15
2
Consider a closed economy consisting of four industries, as depicted in the table.
Closed economy with 4 industries, all values in currency units (CU)
Industry 1 Industry 2 Industry 3 Industry 4
Revenue
1700
390
50
1490
300
40
50
400
Purchases in industry 1 -
100
0
110
Purchases in industry 2 75
-
0
315
Purchases in industry 3 20
0
-
10
Purchases in industry 4 0
0
0
-
Profits
250
0
655
Expenditures
Salary
(a)
1305
Calculate GDP according to the production approach.
Value-added, industry 1:
Value-added, industry 2:
Value-added, industry 3:
Value-added, industry 4:
GDP:
Maximum marks: 2.5
(b)
Calculate GDP according to the expenditure approach.
Value of final goods and services, industry 1:
Value of final goods and services, industry 2:
Value of final goods and services, industry 3:
Value of final goods and services, industry 4:
GDP:
Maximum marks: 2.5
(c)
Calculate GDP according to the income approach.
Total labor income:
Total capital income:
GDP:
Maximum marks: 2
5/15
(d)
Which industry uses no intermediate goods?
Industry
Which industry produces a pure intermediate good, i.e., a good that is not sold to final consumers?
Industry
Which industry produces a pure final good, i.e., a good that is not sold to other industries?
Industry
Maximum marks: 3
3(a)
This figure depicts the labor market equilibrium. Label all elements (eight text fields).
Maximum marks: 4
6/15
3(b)
Figure 1 is the same as in the previous exercise, while figure 2 is a modified depiction of the labor market.
What is the difference between figure 1 and 2, and what is the economic explanation? Which figure is a more
realistic depiction of the labor market, and why?
Note: You do not have to label the figures.
Fill in your answer here
Maximum marks: 4
3(c)
Fill out the following spaces. Enter both answers as numbers without decimal places.
The quantity of unemployed workers in figure 1 is
. The quantity of unemployed workers in figure 2 is
.
Maximum marks: 2
7/15
4(a)
Below, you see JKPG Bank's balance sheet for the year 2050.
JKPG Bank's balance sheet, in billion SEK
Assets
Liabilities
Reserves
20
Demand deposits
1500
Cash equivalents
220
Short-term borrowing
250
Long-term investments
1740 Long-term borrowing
130
Calculate stockholders' equity.
Solution:
In 2051, an extraordinarily hot and humid summer leads to a severe mosquito plague, implying that 30 percent
of Jönköping's population leaves the region forever. It is a very local phenomenon, and the rest of Sweden is
unaffected. This results in a decline of local house prices by 50 percent. JKPG Bank owns many houses in the
Jönköping region, and its long-term investment declines by 10 percent while all other balance sheet elements
remain unchanged.
Calculate JKPG Banks's stockholder equity for the year 2051.
Solution:
Maximum marks: 4
4(b)
Explain the term "bank solvency."
Using your results from question a), is JKPG Bank solvent in 2050? Is JKPG Bank solvent in 2051?
Is this scenario a microeconomic or macroeconomic phenomenon? Explain briefly.
Fill in your answer here
Maximum marks: 4
4(c)
Name and briefly explain one of the three functions banks perform as financial intermediaries.
Fill in your answer here
Maximum marks: 2
8/15
5
This table shows several economic indicators for Sweden and France in 2019.
Sweden
nominal GDP (local currency, million)
PPP conversion factor (local currency per PPP$1)
(a)
France
SEK 5,050,000 € 2,438,000
SEK 9.0
€ 0.8
population (in million)
10.0
67.4
employed (in million)
5.0
28.5
average hours worked per employed
1,605
1,505
total hours worked (in million)
8,025
42,893
Express both economies' GDP in the same purchasing power, i.e., in PPP $. Provide your answer rounded to
the nearest integer.
Sweden:
France:
Maximum marks: 1.5
(b)
Is the following statement true?
According to total GDP in PPP $, Sweden's economy is more prosperous.
Select one alternative:
False
True
Maximum marks: 0.5
(c)
Calculate both economies' GDP per capita in the same purchasing power, i.e., in per capita PPP $. Provide
your answer rounded to the nearest integer.
Sweden:
France:
Maximum marks: 1.5
9/15
(d)
Is the following statement true?
According to total GDP per capita in PPP $, Sweden's economy is more prosperous.
Select one alternative:
False
True
Maximum marks: 0.5
(e)
Please explain briefly why France's GDP and Sweden's GDP in per capita PPP $ differ less than their GDP in
PPP $.
Fill in your answer here
Maximum marks: 1
(f)
Calculate both economies' productivity (measured in PPP $ per hour). Provide your answer rounded to the
nearest integer.
Sweden:
France:
Maximum marks: 1.5
(g)
Is the following statement true?
Sweden's economy is more productive than France's economy.
Select one alternative:
False
True
Maximum marks: 0.5
(h)
Can the differences in productivity explain much of the differences in GDP per capita in PPP $ between
Sweden and France? Using information from the table, explain what else is behind the observed difference
in GDP per capita in PPP $ between Sweden and France.
Fill in your answer here
Maximum marks: 3
10/15
6
This table depicts real GDP per capita in 2011 PPP$ for South Korea and France.
Year
(a)
South Korea
France
1980
6,064
23,537
1981
6,399
23,655
1982
6,821
24,120
1983
7,612
24,300
1984
8,304
24,519
1985
8,859
24,755
1986
9,756
25,238
1987
10,865
25,756
1988
12,040
26,763
1989
12,759
27,576
1990
13,874
28,129
Is the following statement true?
South Korea was more prosperous than France in 1987.
Select one alternative:
True
False
Maximum marks: 1
(b)
Calculate GDP growth rates for South Korea and France from 1981 to 1990. Provide your answer in percent
and rounded to one decimal place.
Year South Korea France
1981
%
%
1982
%
%
1983
%
%
1984
%
%
1985
%
%
1986
%
%
1987
%
%
1988
%
%
1989
%
%
1990
%
%
Maximum marks: 4
11/15
(c)
Fill out the gaps in the text below.
During 1980-1990, France was experiencing
economic growth because its GDP
grew at a rate above zero. In every period, the South Korean economy grew at a considerably
rate than France. Since South Korea's GDP per capita is below France's, this
depicts
growth.
Maximum marks: 3
(d)
France has been growing at a positive rate every year between 1980 and 1990. Most developed economies
have been experiencing sustained economic growth for, at least, the last 100 years.
Using the concept of the production function, briefly explain what the most important driver of sustained
economic growth is.
Fill in your answer here
Maximum marks: 2
7(a)
Assume that labor supply and labor demand of an economy are described by the following equations:
\(\text{Labor supply: } L^S = 4 \times w\)
\(\text{Labor demand: } L^D = A \times (10 - w)\),
where \(w\) is the wage, \(L^S \text{ and } L^D\) are the number of workers supplied and demanded, and \(A\) is
the level of technology.
Assume that the level of technology \(A = 1\). Find the equilibrium wage and the equilibrium level of
employment. Round to the nearest integer.
Equilibrium wage:
Equilibrium level of employment:
Assume that there is a shock and the level of technology declines to \(A = 0.9\).
If wages are flexible, what will be the new equilibrium wage and level of employment? How many
workers will be unemployed? Round to one decimal place.
New equilibrium wage:
New equilibrium level of employment:
Resulting unemployment:
Now assume that wages are rigid at the level you found with \(A = 1\). What will employment be at this
wage? How many workers will be unemployed? Round to one decimal place.
New equilibrium level of employment:
Resulting unemployment:
Maximum marks: 7
12/15
7(b)
What was the source of economic fluctuation in the previous question b) and to which school of thought of
economic fluctuations does it belong? Discuss, briefly, the plausibility of this shock.
Fill in your answer here
Maximum marks: 3
13/15
8
The table below shows current nominal exchange rates of the Swedish Krona (SEK), measured as
the number of units of foreign currency obtained for 100 SEK.
Country USA Euro area United Kingdom Denmark Turkey Thailand
(a)
Currency USD
EUR
GBP
100 SEK 10.2
9.3
7.7
DKK
TRY
THB
69.4 144.7
333.5
Calculate the SEK/THB exchange rate. Round your answer to two decimal places.
Answer:
SEK per 1 THB.
Maximum marks: 0.5
(b)
Calculate the THB/USD exchange rate. Round your answer to two decimal places.
Answer:
THB per 1 USD.
Maximum marks: 1
(c)
Assume that a coffee at Starbucks in Stockholm costs SEK 60 and THB 130 in Bangkok, the capital of
Thailand. Treat Sweden as the domestic country and calculate the real exchange rate. Round your answer to
two decimal points.
Answer:
Maximum marks: 1
(d)
Briefly explain the meaning of the value you have obtained for the real exchange rate in the previous
question. Is your real exchange rate smaller, equal, or greater than one? Why should it be equal to one?
Provide a brief explanation for the deviation of your exchange rate from one.
Fill in your answer here
Maximum marks: 3.5
(e)
Fill each gap by one word.
Assume that many Swedes stopped spending their summer holidays in Sweden and began traveling to
Thailand instead. The supply of SEK in exchange for THB would
would
, and the SEK
.
Maximum marks: 2
14/15
(f)
Fill each gap by one word.
Assume that the Sveriges Riksbank wanted to keep the nominal exchange rate fixed at the previous level. To
achieve this, it would have to
a/an
SEK on the foreign exchange market, leading to
in foreign exchange reserves.
Maximum marks: 2
15/15
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The 14th of October 2020
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