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CECN-301-2J0 Final Exam Overview

The document is a sample final exam for a course at Toronto Metropolitan University, authored by Amin Shirazian, consisting of six questions related to economic concepts such as income tax effects, natural disasters on capital stock, unemployment rates, the Malthusian model, endogenous growth model, and government spending impacts. Students are required to answer five out of the six questions within a three-hour time frame. Each question prompts analysis and explanation of economic theories and their implications.

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12 views2 pages

CECN-301-2J0 Final Exam Overview

The document is a sample final exam for a course at Toronto Metropolitan University, authored by Amin Shirazian, consisting of six questions related to economic concepts such as income tax effects, natural disasters on capital stock, unemployment rates, the Malthusian model, endogenous growth model, and government spending impacts. Students are required to answer five out of the six questions within a three-hour time frame. Each question prompts analysis and explanation of economic theories and their implications.

Uploaded by

bill.nguyen2000
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

CECN-301-2J0 Sample Final

Toronto Metropolitan University


Amin Shirazian

Time: 3 hours

Answer 5 out of the 6 following questions.

Question 1

Suppose that the government imposes a proportional income tax on the representative
consumer’s wage income. What effect does the income tax have on consumption and
labor supply? Explain your results in terms of income and substitution effects.

Question 2

Suppose that there is a natural disaster that destroys part of the nation’s capital stock.

a. Determine the effects on aggregate output, consumption, employment, and the real
wage, with reference to income and substitution effects, and explain your results.

b. Do you think that changes in the capital stock are a likely cause of business cycles?
Explain, with reference to your answer in part (a) and the key business cycle facts.

Question 3

Determine the effects of an increase in the separation rate, s, on the reservation wage and
on the long-run unemployment rate in the one-sided search model of unemployment.
Explain your results.

Question 4

In the Malthusian model, suppose that the quantity of land increases. Using diagrams,
determine what effects this has in the long-run steady state and explain your results.
Question 5

Suppose that z, the marginal product of efficiency units of labour, increases in the
endogenous growth model. What effects does this have on the rates of growth and the
levels of human capital, consumption, and output? Explain your results.

Question 6

Suppose that the natural rate of interest has gone down and that the central bank is
constrained by the zero lower bound, with inflation below the central bank’s target and a
positive output gap. Further, suppose that if government spending goes up permanently,
that higher future government spending will increase anticipated future inflation (by a
Phillips curve effect in the future). What will be the multiplier effect of government
spending on output, assuming that the nominal interest rate stays at zero? Explain your
results with the aid of diagrams. [Hint: increase in the government expenditure shifts the
output demand curve to the right and increases natural interest rate]

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