A mayor of a big city finds that 262 of 400 randomly selected city residents believe that the city should spend more money on public transportation. Use this information for a large-sample inference of the proportion of all city residents who believe that the city should be spending more.

1. What percentage of the sample members believe the city should be spending more on public transportation?

2. What is the standard error of the proportion?

3. What is the margin of error for a 95% confidence interval for the population proportion?

4. What is the best interpretation for the 95% confidence interval?

5. Based on the findings, is it safe to say that a majority of the city's population wants more spent on public transportation?

Answer two (2) of the following essay questions.

1) How do automatic stabilizers, on both the expenditure and revenue sides of the budget, respond when the economy is in 1) a contractionary 2) an expansionary gap?

2) How much should the government 1) increase spending or 2) cut taxes when the economy is in a contractionary gap equal to 500 billion and the MPC equals 0.8.

3) According to the classical school of economists, the economy is self-correcting. Explain why the economy will automatically move to long run equilibrium (potential output) when it is in an expansionary and in a contractionary gap.

4) Give an account of how an increase in government spending can lead to an increase in the trade deficit.

2. Economists observed the only 5 residents of a very small economy and estimated each one’s consumer spending at various levels of current disposable income. The accompanying table shows each resident’s consumer spending at three income levels.

a) What is each resident’s consumption function? What is the MPC for each resident?

b) What is the economy’s aggregate consumption function? What is the MPC for the economy?

The amount of money spent by Superstore customers is normally distributed with mean 150 and a standard deviation of 12. Suppose that a sample of 64 customers are selected. Answer the following questions.

What is the mean of the sampling distribution?

150

140

170

240

What is the standard error of the sampling distribution?

1.23

1.50

1.55

1.20

What is the probability that the average spending by the customers is greater than 154?

0.9962

0.9966

0.0038

0.0048

What is the probability that the average spending by the customers is less than 154?

0.9962

0.9966

0.0038

0.0048

If the distribution of data is skewed to the left:

Median < Median < Mode

Mean, mode and median are equal

Only mean and mode are equal

None of the above

8. A country introduces more generous benefits paid to people who are unemployed.
Which of the following statements about the labour market is not correct?
(a) The equilibrium real wage will fall.
(b) Unemployed people will spend longer on average looking for jobs.
(c) The equilibrium unemployment rate will increase.
(d) The size of the labour force will increase.
9. Assume the central bank sets interest rates with the goal of achieving an inflation
target. Which of the following statements is a correct reason why the aggregate
demand curve is downward sloping?
(a) Higher inflation leads the central bank to increase the nominal interest rate by
more than the inflation rate increases, thus raising the real interest rate, which
leads to lower spending.
(b) Higher inflation reduces the real value of aggregate income, which leads to
lower spending.
(c) Higher inflation reduces the real value of the money supply, which leads to
lower spending.
(d) Higher inflation leads the central bank to increase the nominal interest rate by
less than the inflation rate increases, thus raising the real interest rate, which
leads to lower spending.
10. A country permanently increases its saving rate. According to the Solow growth
model, which of the following statements is correct?
(a) Both the level and growth rate of output per person are permanently higher.
(b) Both the level and growth rate of output per person are permanently lower.
(c) The level of output per person is permanently lower, but there is no
permanent effect on the economy’s growth rate.
(d) The level of output per person is permanently higher, but there is no
permanent effect on the economy’s growth rate.

Suppose you are given the following macroeconomics data (in million) about an economy:

Aggregate Demand:                                                           AD=C+I+G+NX

Short-run Aggregate Supply (SRAS):                              Y=500P-8,000

Long-run Aggregate Supply (LRAS):                               YFE=$4,000

Where,

5. YFE is real GDP at full employment
6. P is the aggregate price level
7. Consumption spending:                     C=300+0.5(Y-T)-156P
8. Private investment spending, I = $6,000
9. Government spending, G = $900
10. Tax on consumption, T = 0.04*Y    
11. Net export,   NX = - $3,040

1. Find the equation for the AD curve for this economy. (2 points)

2. Find the short-run equilibrium level of real GDP (YSR ) and the aggregate price level (P ). (2 points)

3. Draw a graph representing the AD curve, the SRAS curve, and the LRAS curve. Show all critical points

    and carefully label your graph. Provide a brief comment on this graph. (3 points)

4. Calculate the value of the public saving in the short-run? Is government running a budget surplus or a budget

    deficit? (1 point)

5. Assume further that the aggregate production function is: Y=5*L12 , where L is the number of

    employed labor. Holding everything else is constant, find the value of the productivity level at the long-

    run equilibrium and provide a brief comment on this value. (2 points)

Suppose now the government decides to return this economy to its real GDP at full employment through fiscal

policy (government spending policy).

6. Provide a numerical analysis for this policy. (2 points)

7. Given your answer in question 6, provide an equation for the new Aggregate Demand curve and graph? (2 points)

The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) Demand Supply INTEREST RATE (Percent) LOANABLE FUNDS (Billions of dollars) Demand Supply Scenario 1: Individual Retirement Accounts (IRAs) allow people to shelter some of their income from taxation. Suppose the maximum annual contribution to such accounts is $5,000 per person. Now suppose there is an increase in the maximum contribution, from $5,000 to $8,000 per year. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of saving causes the equilibrium interest rate in the market for loanable funds to and the level of investment spending to . Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government repeals a previously existing investment tax credit. Shift the appropriate curve on the graph to reflect this change. The repeal of the previously existing tax credit causes the interest rate to and the level of saving to . Scenario 3: Initially, the government's budget is balanced; then the government responds to the conclusion of a war by significantly reducing defense spending without changing taxes. This change in spending causes the government to run a budget , which national saving. Shift the appropriate curve on the graph to reflect this change. This causes the interest rate to , the level of investment spending.

4. Using the popular Utility function U=E(r) - 0.5*A*Variance(r), what is the utility for an investor with risk-aversion index of 3, whose portfolio has an expected return of 7% and a standard deviation of 16%?

Report 2 decimals in your answer

6. South Park Company's stock has an expected Return of 6.56% while Quahog Company's stock has an expected return of 3.8%. What % of my wealth should I invest in Quahog Company's stock to have an expected return of 10.86%? Report you answer as a % with 2 decimals. If your answer is 3.56%, just enter/type "3.56"

If the intracellular concentrations of a metabolite (M-OH) and its phosphorylated form (M-OPO32-) were 3 mM and 0.08 mM, respectively, and if the intracellular concentrations of ATP and ADP were 3.8 mM and 0.17 mM, respectively, what would be the numerical value of \Delta Δ G (in kcal per mol to the nearest hundredth) for the following reaction: M-OH + ATP <--> M-OPO32- + ADP + H+? Assume a temperature of 37 °C and a pH of 7.4. To solve this problem, you will need to know the standard free energies of hydrolysis of the phosphorylated metabolite and of ATP. These values are –3.4 kcal/mol and –7.3 kcal/mol, respectively.

If the intracellular concentrations of a metabolite (M-OH) and its phosphorylated form (M-OPO32-) were 2.9 mM and 0.09 mM, respectively, and if the intracellular concentrations of ATP and ADP were 3.8 mM and 0.17 mM, respectively, what would be the numerical value of \DeltaΔG (in kcal per mol to the nearest hundredth) for the following reaction: M-OH + ATP <--> M-OPO32- + ADP + H+? Assume a temperature of 37 °C and a pH of 7.3. To solve this problem, you will need to know the standard free energies of hydrolysis of the phosphorylated metabolite and of ATP. These values are –3.3 kcal/mol and –7.3 kcal/mol, respectively. The correct answer is -8.48