SECTION A: ECONOMIC GROWTH

Question 1. Answer the following questions about Romer’s 1990 model .

a. Briefly explain the main differences between Romer’s 1986 and 1990 models.

b. Write down the two most important predictions of Romer’s 1990 model.

c. What is the empirical evidence for the model and what are the challenges in

conducting empirical studies of this model? Explain briefly.

d. What are the appropriate policy tools for this model? Explain briefly.

Question 2. Answer the following questions about Lucas model

a. What is the main difference between MRW’s augmented Solow Model and Lucas

Model?

b. What are the two most important predictions of Lucas model?

c. What is the empirical evidence for Lucas model and what are the challenges in conducting

empirical studies of this model? Explain briefly.

d. What are the appropriate policy tools for this growth model? Explain briefly.

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SECTION B. OPEN ECONOMY MACROECOOMICS

There are two questions in this section, each worth 50 points. Please answer only one question.

Question 1. Answer the following questions.

a. How an increase in foreign interest rate (r*) will affect an economy with fixed exchange rate

regime and perfect capital mobility? Illustrate your answer graphically and explain the

economic intuition briefly.

b. Answer the following two questions about law of one price

ii. What is meant by “law of one price” in an open economy macroeconomics? Provide

two theoretical propositions; explain each very briefly using formulas and

economic intuition behind them.

iii. Explain whether or not they hold empirically.

c. Using absorption approach and assuming that Laursen-Metzler effect is at work, show

graphically and explain briefly how an increase in foreign income will affect an economy?

d. Assume that you are an economic adviser to the government. In an economic environment

in which exchange rate is fixed, capital account is free, budget deficit and current account

deficit are high, government wants to cut down on high unemployment rate. What would

you advise him/her and why? Explain your answer

Question 2. Answer the following questions .

a. How an increase in tax rate in a small open economy with fixed exchange rate and perfect

capital mobility will affect the economy? Illustrate your answer on the graph and explain the

economic intuition briefly.

b. In a small open economy, if a country’s absorption is smaller than its income what policies

the government can use to bring both external and internal balances to equilibrium (ignore

Laursen-Metzler effect assume that the country is not in full employment). Show your

answer graphically and explain it briefly? .

c. What are the main implications of the first, second and third generation currency crisis

models? Which one explains the recent crisis in Developed countries better and why?

Explain your answer

d. Assume that you are an economic adviser to the Thai government during 1990s. After the

financial crisis in 1997, the government seeks your advice for policy formulation on

economic recovery and to avoid future crisis. What policy advice you would formulate? You

need to remind him the causes of the crisis and the state of the economy after the crisis

before providing your policy advice.

还请有耐心的人解答,答对一半就给分。