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L11200 E1

L11200 E1 Turn over

The University of Nottingham

SCHOOL OF ECONOMICS

LEVEL 1 MODULE, SPRING SEMESTER 2011-2012

L11200 INTRODUCTION TO MACROECONOMICS

Time allowed ONE Hour THIRTY Minutes

Candidates may complete the front cover of their answer book and sign their desk card but must NOTwrite anything else until the start of the examination period is announced

Answer TWO Questions

All questions are given the same weightWhere individual questions have separately itemised parts (e.g. (a), (b), etc.) each part is

given the same weight unless otherwise stated.

No calculators are permitted in this examination.

Dictionaries are not allowed with one exception. Those whose first language is not Englishmay use a standard translation dictionary to translate between that language and English

provided that neither language is the subject of this examination. Subject specific translationdictionaries are not permitted.

No electronic devices capable of storing and retrieving text, including electronic dictionaries,may be used.

DO NOT turn examination paper over until instructed to do so

ADDITIONAL MATERIAL:

INFORMATION FOR INVIGILATORS:

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L11200 E1

L11200 E1 END

Answer TWO of the following

1. In the context of the model ofeconomic fluctuations developed in the course,answer the following: (all parts carry equal marks)

a) Explain how households choose the level of capital and labour they employ tocreate output.

b) What is the effect on household consumption of a permanent increase inhousehold income of x?

c) In the version of the model of economic fluctuations with fixed labour supply and

capital supply, what is the effect of a negative technology shock on wages,

rental prices, investment and consumption?

2. In the context of the model ofeconomic fluctuations developed in the course,answer the following: (all parts carry equal marks)

a) Will a permanent positive shock to technology cause labour supply to increase?b) Explain how households decide how much capital services to supply to the

market.

c) How does the job-finding rate respond to a negative technology shock?

3. In the context of the model ofmoney and prices considered in the course, answerthe following (all parts carry equal marks)

a) Explain why increasing the money supply has no effect on output.

b) Explain why a decrease in the rate of money growth causes the price level tojump downwards.

c) How can printing money be beneficial to the government?

4. In the context of the model ofgovernment policy considered in the course, answerthe following (all parts carry equal marks)

a) How does a permanent increase in government expenditure impact householdconsumption?

b) What effect does an asset income tax have on the market for capital?

c) Does a temporary cut in income tax stimulate the economy?