How do the following events affect the value of the USD, all other things being unchanged?

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

 

1.)  How do the following events affect the value of the USD, all other things being unchanged?

	Appreciates	Depreciates
Out of displeasure at the failed NAFTA negotiations with D. Trump, Canada and Mexico boycott American products		X
Because of Brexit, investors withdraw their investments from Great Britain and invest new in the USA	X
D. Trump introduces import duties for all important trading partners	X
Tourism in USA is booming and attracting more and more tourists from Europe and Asia	X
US Federal reserve raises interest rates	X
China, Japan and EU no longer buy US government bonds as result of growing protectionism.		X

 

2.a) Denmark operates a fixed-rate system and has its currency, the Danish krone (DKK) fixed to the euro at a rate of 0.134 EUR = 1 DKK, with an exchange rate fluctuation band of +/- 2.25%. Draw this fixed-rate system with its characteristics and with the supply and demand curve for Danish Krone (DKK) in exchange with EUR, in the lower graph. Do not forget to mark the axes!

 2.b) Due to the euro crisis, investors lose their confidence in the euro. The loss of confidence is triggering reactions on the Danish financial market. On the financial market, people sell their EURund buy DKK. Draw this intervention in the graph above.

 

 2.c) What kind of transaction must be Danish Central Bank carry out in such a case so that the fixed exchange rate can be guaranteed?

 

 3.) After the reunification of Germany, paymebts to rebuild the former East Germany led to a major expansion of aggregate demand in Germany. To combat the increasing inflation, the german central bank had to raise interest rates. At that time, many currencies of EU countries were fixed to the german currency (the Deutsche Mark). Explain why in these countries the recession was reinforced by the policy of german central bank.

4) Assume that also natural resources are an important input for the production of GDP but that their contribution is neglected in the production function, which has been used here. What does this imply about the Value of total-factor productivity (TFP), which you have calculated in question xyz? 

5) Calculate GDP and GNP using the following figures:

 

In billion of dollars
Consumption	3600
Investment	900
Transfer payments	800
Government expenditures	1000
Savings	1000
Exports	650
Imports	550
Net factor income to and from abroad

 

6) Which GDP components (component by the expenditure side) are affected by the following transactions:

Canton AG build new hospital	I up
Income of teacher of primary school	G up
Swiss army buys new jets	I and M up
Old age pension is being paid	Nothing
Company is not able to sell at their production and piles up inventories	I up

 

7) Which goods and sercives are not included in GDP which can be regarded as welfare? 2 Examples ?
Childcare, volunteer work, household

8) Is it possible that the growth rate of GDP is lower than growth rate of GDP per employed person? Explain why (not).

9) Assume that growth rate of total-factor productivity (TFP) becomes zero, and therefore there is no more technological progress. Will growth of GDP still be possible in the long run? If yes, under what conditions?

 10) Multiple Choices

 

 1)      Assume an economy where there is no population growth. In the neoclassical growth model, an increase in the savings rate can, in the long run, cause an increase in…

a.       GDP growth

b.      GDP growth per worker

c.       Neither GDP growth nor GDP growth per worker

d.      Growth of the capital stock per worker 

2)      If the capital stock per worker in an economy has increased over a certain time and total factor productivity has increased as well

a.       GDP per worker (labor productivity) has grown at the same rate as productivity

b.      GDP per worker (labor productivity) grew at a higher rate than total factor productivity

c.       GDP per worker (labor productivity) has grown at a lower rate than total factor productivity

d.      GDP per worker (labor productivity) aims at a maximum value of total factor productivity exceeded

 

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