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DEPARTMENT OF ECONOMICS
GRADUATE MA COMPREHENSIVE EXAMINATION
MICROECONOMICS
1. a. Derive the equation for the ordinary demand function for good X. Express X as a function of
Income and Prices. Show your work.
U = 10 X1/2Y1/2
b. Derive the indirect utility function for this direct utility function. Show your work.
MA COMPREHENSIVE EXAM 2017 Summer EXAM # 3 MA
MICROECONOMICS
2. Welfare effects of a tax (simple per unit tax) on a good produced by a perfectly competitive
industry. Explain the conditions, if any, under which the loss of surplus created by the tax will
consist of
MICROECONOMICS
3. Suppose the demand for a good produced by a perfectly competitive, increasing cost industry
decreases. What are the effects of this decrease in demand on profits and factor returns in the
short run and the long run? Explain as completely as you can.
MA COMPREHENSIVE EXAM 2017 Summer EXAM # 3 MA
MACROECONOMICS
1. If immigration is reduced, the labor force grows more slowly. In the Solow growth
model, demonstrate graphically and explain the effects of slower labor force growth on
the level of real GDP per capita and its long-run growth rate. Based on your answer
above, does the domestic labor force benefit from reduced immigration?
MA COMPREHENSIVE EXAM 2017 Summer EXAM # 3 MA
MACROECONOMICS
2. Using the IS-MP framework, explain the “impossible trinity,” that is, why a small open
economy cannot have an independent monetary policy with fixed exchange rates and
perfect capital mobility.
.
MA COMPREHENSIVE EXAM 2017 Summer EXAM # 3 MA
MACROECONOMICS
3. Using the IS-MP framework, depict and explain the effect of an increase in the central
bank’s target interest rate on a country’s floating exchange rate. What are the economic
consequences of this policy change and resulting exchange rate change on the domestic
economy and on other countries in the global economy?
MA COMPREHENSIVE EXAM 2017 Winter EXAM # MA
MICROECONOMICS
1. (30 pts.) Consider a constant cost industry which is perfectly competitive. Suppose that the
government provides a subsidy to producers of x dollars per unit produced.
a. What is the effect of the subsidy on consumer and producer surplus in the long run?
MICROECONOMICS
2. (35 pts.) Consider a monopoly facing demand given by Q = 22 – P and for which the total
cost is C = 2Q + Q2 . Suppose there is a price ceiling of $16 imposed on this good.
a. What is the firm’s profit maximizing output and profit with the price ceiling?
MICROECONOMICS
U(x,y) = x0.3y0.7 .
a. Derive the uncompensated (ordinary) demand functions below for this utility function.
X = 0.3 I P x -1 and
Y = 0.7 I P y-1 .
MACROECONOMICS
1. In a Solow growth model, depict and explain the effect of a decrease in the rate of
technical progress. How does this affect the level of real GDP per effective worker?
What determines the growth of the level of real GDP in the Solow model? How does the
decreased growth of technical progress affect the long-run growth of living standards?
MA COMPREHENSIVE EXAM 2017 Winter EXAM # MA
MACROECONOMICS
2. Demonstrate graphically and explain how deflation affects the economy in a liquidity
trap. What is the effect of an increase in deflation on real GDP in a liquidity trap?
What other option exists for escaping a liquidity trap. Demonstrate and explain the
effectiveness of monetary and fiscal policy beginning from a position in a liquidity trap.
MA COMPREHENSIVE EXAM 2017 Winter EXAM # MA
MACROECONOMICS
3. Depict graphically and explain Ricardian equivalence. What does Ricardian equivalence
imply for the effect of fiscal stimulus? What are some reasons why Ricardian
equivalence might not hold?
Econometrics Comprehensive Feb. 2017 Exam # MA
You must write your entire answer only in the space provided and not on the backs of pages or elsewhere. Write in pencil; erase
completely to change an answer. If you do not understand a question, you may write down what you assume the question is asking and
answer that question.
Please place a check in front of each of the following statements. No exam without a check by each will be graded.
.________I am familiar with the academic honesty policies of the course, understand them and accept them.
.________I understand that I may use no books, notes, programmable calculators or other materials on the exam.
.________I understand that I may not look at any electronic device during the exam. (Simple Calculators are allowed)
.________I understand that I may not look at another student’s paper or attempt to communicate with any student during the exam.
1 4.3 1 36 0.289916 1 0 0 0
2 4.5 1 59 -0.737732 0 0 0 0
1. What assumptions about the data are required to be able to test hypotheses about the coefficients of Regression 1? Interpret
the assumptions in terms of the data in the equation. (4 points)
2. Test the hypothesis that the effect of being FEMALE in Regression 1 is half as large as the effect of being a non-native English
speaker (NNENGLISH) ASSUMING THAT HOMOSCEDASTICITY AND NORMALITY APPLY.
(a) the null hypothesis (1)
(c) the test statistic expressed as an equation or formula using variables (2)
(d) fill in any numbers in the equation or formula that you can and tell where you would get the rest (4)
(e) the expression for finding the critical value of the test statistic using EViews. (2)
(f) Draw a picture to show the decision rule for accepting or rejecting the hypothesis (2)
(h) Illustrate the p-value in this question in a new diagram below. (2)
3. All of the data used in Regression 1 were collected at one school in one year. Now suppose that you had the same data
for 5 years and 50 schools.
a. What is the name of the type of analysis that uses all of the data? __________________________________(1)
b. Write out the equation that EViews would estimate for you with all the new data.(4)
c. What options do you need to specify in EViews to be able to test hypotheses about the coefficients? (2)
d. Explain why you need to specify this option that was not needed before adding more data? (2)
e. Describe some ways in which the results might be better than those in Regression 1? (4)
4. Suppose only some schools had introduced “clicker” technology (each student responds to questions during a class by
“clicking” a response option on an electronic device that each student has) into all of their classrooms a few years ago.
a. Describe in words exactly how you would try to determine whether or not this new technology led to higher
course evaluation scores for instructors in schools using the new technology. (4)
d. Interpret the coefficients of any new variables in this equation that were not included in 3.b. above.(4)
Econometrics Comprehensive Feb. 2017 Exam # MA
You must write your entire answer only in the space provided and not on the backs of pages or elsewhere. Write in pencil; erase
completely to change an answer. If you do not understand a question, you may write down what you assume the question is asking and
answer that question.
6. Show precisely how you would calculate its value and include how you would obtain any numbers that you do not have
available. (3)
7. Suppose you had the output of a regression the same as Regression 1 but instead of using COURSE_EVAL as the
dependent variable you used FOUR_OR_MORE.
a. How would you determine if the estimated equation could be used to predict the probability of an instructor
receiving a high evaluation? (2)
b. If the new equation can’t be used, what could you do? (2)
MA COMPREHENSIVE EXAM 2016 Summer EXAM # MA
MICROECONOMICS
1. Consider the ordinary (uncompensated) demand functions and the related utility function
below.
MICROECONOMICS
a. Show how the incidence of the tax depends on the elasticity of demand for the
product, other things being equal.
b. Show how the deadweight loss caused by the tax also depends of the elasticity of
demand for the product, other things being equal.
MA COMPREHENSIVE EXAM 2016 Summer EXAM # MA
MICROECONOMICS
3. Consider a profit maximizing monopoly. The demand for its product and its costs are given
below.
Q = 2,000 – 20 P
C = 0.05 Q2 + 10,000
MACROECONOMICS
1. During WW II, Germany and Japan had much of their productive capital destroyed by
war. The loss of capital was relatively greater than the loss of labor. Using the Solow
growth model, depict this graphically and explain. Would the war leave Germany and
Japan permanently disadvantaged relative to the United States, which suffered no
damage? Depict your answer graphically and explain thoroughly.
MA COMPREHENSIVE EXAM 2016 Summer EXAM # MA
MACROECONOMICS
2. Explain and depict a model of efficiency wages. What is the value of the efficiency
wage relative to the market-clearing wage? Why do firms pay efficiency wages? Do
efficiency wages explain wage stickiness?
MA COMPREHENSIVE EXAM 2016 Summer EXAM # MA
MACROECONOMICS
3. Using the IS-MP framework, depict and explain the effect of an increase in the central
bank’s target interest rate on a country’s floating exchange rate. What are the economic
consequences of this policy change and resulting exchange rate change on the domestic
economy and on other countries in the global economy?
MA COMPREHENSIVE EXAM 2016 Summer EXAM # MA
Please place your initials in front of each of the following statements. No exam without initials by each will be graded.
.________I am familiar with the academic honesty policies of the course, understand them and accept them.
.________I understand that I may use no books, notes, calculators or other materials on the exam.
.________I understand that I may not look at any electronic device during the exam.
.________I understand that I may not look at another student’s paper or attempt to communicate with any student during the exam.
Throughout the whole exam, if you do not have or do not know how to find a number that you need, write down a brief
description of how you would obtain it (possibly with Eviews) or use a reasonable estimate of it.
You must write your entire answer only in the space provided and not on the backs of pages or elsewhere. Write in pencil; erase
completely to change an answer. If you do not understand a question, you may write down what you assume the question is asking and
answer that question.
MA COMPREHENSIVE EXAM 2016 Summer EXAM # MA
3. Describe a procedure that would allow you to make a meaningful comparison of the coefficients in Questions #1 and #2. (3 points)
4. In Regression 1, Test the hypothesis, assuming homoscedasticity, at the 1.63% level of significance, that the effect of being black
is 10% of the effect of being denied mortgage insurance and that the effect of an increase in high loan-to-value is equal to 4 times
the effect of increase in the consumer credit score.
The command for estimating Regression #5 in EViews is
BINARY(D=N <Distribution=Normal for Probit>) BL DMI HL/V CCS C P/I E/I ML/V MCS PBC SE S HS UR CDM
a. Ho: (2 points)
b. Ha: (1 point)
(ii)
d. Draw the relevant diagram on the axes above and carefully label everything (2 points)
g. Describe the procedures to find any values needed for the test statistic (2 points)
5. Suppose you learn that the consumer credit score (CCS) is affected by being denied a mortgage.
a. What is the name of the problem that this problem causes in the analysis presented in the table of regression
output above?(2 points)
b. What are the consequences of this problem for any of the magnitudes shown in the table? (2 points)
e. If the desired level of significance is 5%, what is the critical value? (You may use an EViews expression). (2
points)
7. Regression #1 uses data for individual people who applied for a mortgage in one year. Assume instead that you have
annual data for 1960 – 2015 on population averages or percentages (for example, the percentage of mortgage
denials each year, the percentage of blacks applying for a mortgage each year, the average P/I ratio each year, etc.
a. With these data you could estimate a regression model such as;
REGRESSION A: LS C BL P/I E/I ML/V MCS PBC DMI HL/V CCS SE S HS UR CDM
b. Suppose you wanted to forecast mortgage denials in the coming year (2016)
Discuss whether or not Regression A (the one in a. above) would provide a good basis for your forecast. (3
points)
c. As an alternative, write out the equation for an autoregressive distributed lag model to forecast DENY using
two lags of DENY and 3 lags of an independent variable, X. ( 3 points)
e. Describe the steps required to determine the right number of lags to use in your model. (4 points)
MA COMPREHENSIVE EXAM 2016 Summer EXAM # MA
f. Describe the role that pseudo out-of-sample forecasts play in determining whether your forecast of DENY for
2016 is a good forecast. (4 points)
MICROECONOMICS
a) For efficiency in production, the RTSlk for all producers of goods x and y must be equal.
Explain how this condition is likely to be achieved by cost minimizing firms in perfectly
competitive input markets. (Note that you are not asked to prove the condition itself.)
b) Consider a society consisting of two individuals, A and B. A’s demand curve for a particular
public good (q) is
qA = 100 - p ,
qB = 200 – p .
The marginal cost of this public good is $120 per unit. What is the optimal quantity of q?
Explain.
MA COMPREHENSIVE EXAM 2016 Winter EXAM #
MICROECONOMICS
MICROECONOMICS
4x2 + y2 = 500 ,
U=x+y.
b) What is the rate of product transformation between x and y (RPTxy) at the optimal amounts of x
and y?
c) Construct a diagram showing the production-possibilities curve, indifference curves, and your
answers to a) and b).
MA COMPREHENSIVE EXAM 2016 Winter EXAM #
MICROECONOMICS
4. What are the utility maximizing values of x and y for the utility function below when I = 12, px
= 2, py = 1.
MACROECONOMICS
1. Do countries that save and invest more grow faster in the long run? Can a country save
too much for its own good? Depict your answers graphically or mathematically and
explain thoroughly.
MA COMPREHENSIVE EXAM 2016 Winter EXAM #
MACROECONOMICS
2. Explain and depict graphically why deflation limits monetary policy at the zero bound.
What alternative policy options are available at the zero bound and how effective are these
options?
MA COMPREHENSIVE EXAM 2016 Winter EXAM #
MACROECONOMICS
3. The Congressional Budget Office projects increase fiscal deficits in the coming years.
Explain and show graphically the effect of increased fiscal deficits on the U.S. dollar
exchange rate and real GDP, assuming perfect capital mobility. How does your answer
change if capital mobility decreases, or is restricted altogether?
ECONOMETRICS COMPREHENSIVE EXAM Winter 2016 Exam # Page 1
Please place your initials in front of each of the following statements. No exam without initials by each will be graded.
.________I am familiar with the academic honesty policies of the University understand them and accept them.
.________I understand that I may use no books, notes, calculators or other materials on the exam.
.________I understand that I may not look at any electronic device during the exam.
.________I understand that I may not look at another student’s paper or attempt to communicate with any student during the exam.
Throughout the whole exam, if you do not have or do not know how to find a number that you need, write down a brief
description of how you would obtain it (possibly with Eviews) or use a reasonable estimate of it.
You must write your entire answer only in the space provided and not on the backs of pages or elsewhere. Write in pencil; erase
completely to change an answer. If you do not understand a question, you may write down what you assume the question is asking and
answer that question.
ECONOMETRICS COMPREHENSIVE EXAM Winter 2016 Exam # Page 2
3. Describe a procedure that would allow you to make a meaningful comparison of the coefficients in Questions #1 and #2.
4. In Regression 1, Test the hypothesis, assuming homoscedasticity, at the 1.63% level of significance, that the effect of being black
is 10% of the effect of being denied mortgage insurance and that the effect of an increase in high loan-to-value is equal to 4 times
the effect of increase in the consumer credit score.
The command for estimating Regression #1 in EViews is
LS BL DMI HL/V CCS C P/I E/I ML/V MCS PBC SE S HS UR CD. You should use these abbreviations.
a. Ho:
b. Ha:
(ii)
d. Draw the relevant diagram on the axes above and carefully label everything
e. Write down the equation defining the test statistic
5. Suppose you learn that the consumer credit score (CCS) is affected by being denied a mortgage.
a. What is the name of the problem that this relationship causes in the analysis presented in the table of
regression output above?
b. What are the consequences of this problem for any of the magnitudes shown in the table?
c. Describe the steps that you could take overcome the problem. Be sure to write down any additional
regression models that you would estimate if all you had was a program that would give you OLS estimates.
ECONOMETRICS COMPREHENSIVE EXAM Winter 2016 Exam # Page 4
6. Regression #1 uses data for individual people who applied for a mortgage in one year. Assume instead that you have
annual data for 1960 – 2015 on population averages or percentages (for example, the percentage of mortgage
denials each year, the percentage of blacks applying for a mortgage each year, the average P/I ratio each year, etc.
a. With these data you could estimate a regression model such as;
LS C BL P/I E/I ML/V MCS PBC DMI HL/V CCS SE S HS UR CDM
b. What would be the consequence of this violation for your analysis? (2 points)
c. How could you use EViews to determine if the violation in a. had actually occurred? (2 points)
d. Suppose you wanted to forecast mortgage denials in the coming year (2016)
Discuss whether or not Regression #1 would provide a good basis for your forecast. (3 points)
e. As an alternative, write out the equation for an autoregressive distributed lag model to forecast DENY using
two lags of DENY and 3 lags of an independent variable, X. ( 3 points)
g. Describe the steps required to determine the right number of lags to use in your model. (4 points)
h. Describe the role that pseudo out-of-sample forecasts play in determining whether your forecast of DENY for
2016 is a good forecast. (4 points)
i. Suppose you think that the relationship between mortgage denials and the P/I ratio might be different
following the financial crisis in 2008.
i. Sketch a graph to illustrate what you need to determine.(4 points)
ii. Describe how you could use a Chow test in this case? (3 points)
MA COMPREHENSIVE EXAM 2015 Summer EXAM #
DEPARTMENT OF ECONOMICS
GRADUATE MA COMPREHENSIVE EXAMINATION
MICROECONOMICS
1. a. Derive the equation for the ordinary demand function for good X. This demand function should
express X as a function of Income and Prices. Show your work.
U = 10 X0.5 Y0.5
b. Derive the indirect utility function for this direct utility function. Show your work.
MA COMPREHENSIVE EXAM 2015 Summer EXAM #
MICROECONOMICS
2. Consider a perfectly competitive industry. Under what conditions, if any, will the consumer and producer
surplus loss created by a per unit tax on the good produced by the industry consist of
3. Suppose the demand for a good produced by a perfectly competitive, increasing cost industry decreases.
What are the effects of this decrease in demand on profits and factor returns in the short run and in the long
run? Explain as completely as you can.
MA COMPREHENSIVE EXAM 2015 Winter EXAM #
MICROECONOMICS
U( X, Y ) = X1/2 + Y .
MICROECONOMICS
2. (20 points) What are the income and substitution effects of a price change?
Construct a graph which clearly shows the income and substitution effects for a normal
good.
MA COMPREHENSIVE EXAM 2015 Winter EXAM #
MICROECONOMICS
3. (20 points) Consider a profit maximizing firm in a perfectly competitive market. The
firm employs two inputs, labor (L) and capital (K). Assuming that technology does not
change, what will be the effects of an increase in the price of labor relative to capital on the
firm’s ratio of labor to capital (L/K) and on the rate of technical substitution of labor for
capital (RTSLK). Explain graphically.
MA COMPREHENSIVE EXAM 2015 Winter EXAM #
MICROECONOMICS
4. (20 points) Consider a perfectly competitive industry. Under what conditions, if any,
will the loss of surplus created by a unit tax on a good produced by the industry consist of
MICROECONOMICS
5. (20 points) Explain what deadweight loss is. Explain why a monopoly produces
deadweight loss?
MA COMPREHENSIVE EXAM 2015 Winter EXAM #
MACROECONOMICS
How do changes of each variable ( s, n, g, δ ) affect the long-run equilibrium? What are
the implications of this model for the long-run growth of living standards?
MA COMPREHENSIVE EXAM 2015 Winter EXAM #
MACROECONOMICS
2. What is the “Lucas critique”? Explain the implications of the critique for policy analysis.
Relate the critique to Lucas’ finding that the slope of the Phillips curve is a function of the
variability of prices.
MA COMPREHENSIVE EXAM 2015 Winter EXAM #
MACROECONOMICS
3. Explain and depict graphically the liquidity, income and Fisher effects on interest rates.
MA Econometrics Comprehensive Exam Winter 2015 Exam #
1. Please read the following instructions completely before starting to answer the exam questions.
2. Please put all electronic devices (calculators, telephones, pda’s, etc.) away right now so that neither you nor
anyone else can see or hear them.
3. Please put all books, papers, notes, etc. of any kind that you brought into the exam room away right now so
that neither you nor anyone else can see them. You may not refer to any such materials during the exam.
4. During the exam you may neither ask other students questions nor answer questions. If you do not understand
the wording of a question or feel that additional information is needed, write down what you assume to be true
so that you can answer the question asked.
5. You may separate the pages during the exam. If you separate the pages do not attempt to put them back
together, just write your name on each page and submit them all together.
6. Please answer in the space provided only. Please do not write on the backs of the pages or in places other
than the answer spaces.
7. If a calculation is called for, please show only the numbers and the nature of the calculation called for; do not
finish the calculation: e.g., (187.2 / 349.6) is a complete, correct answer.
8. Abbreviate whenever the result is clear. For example, shorten PROSES to PR and PCARN to PC.
9. Round off numbers. For example, do NOT write 6.282986, just write 6.28.
MA Econometrics Comprehensive Exam Winter 2015 Exam #
1 33 38.46154 1 0
2 31 12.50000 1 0
3 30 9.857142 0 0
4 30 8.241758 0 0
5 31 17.78846 0 0
6 29 10.09615 0 1
7 26 17.78846 1 0
8 28 30.38461 1 0
Regression 1
Dependent Variable: AHE
Method: Least Squares
Sample: 1 7711
Included observations: 7711
White heteroskedasticity-consistent standard errors & covariance
Regression 2
Dependent Variable: AHE
Method: Least Squares
Sample: 1 7711
Included observations: 7711
genr hi_earnings=1
smpl if ahe>@mean(ahe)
genr hi_earnings=1
smpl @all
Regression 3
Dependent Variable: HI_EARNINGS
Method: Least Squares
Sample: 1 7711
Included observations: 7711
White heteroskedasticity-consistent standard errors & covariance
Regression 4
Dependent Variable: HI_EARNINGS
Method: ML - Binary Probit (Quadratic hill climbing)
Sample: 1 7711
Included observations: 7711
Convergence achieved after 4 iterations
QML (Huber/White) standard errors & covariance
1. What three assumptions about the data are required to be able to test hypotheses about the coefficients for the
regression of Regression 1? (4 points)
2. Test the hypothesis that the coefficients for the effects of FEMALE and BACHELOR in Regression 2 are really the
same magnitude but opposite signs using an F-test of a restriction ASSUMING THAT HOMOSCEDASTICITY
AND NORMALITY APPLY.
(a) the null hypothesis (1)
(c) the test statistic expressed as an equation or formula using variables (4)
(d) fill in any numbers that you can and tell where you would get the rest (4)
(e) the expression for finding the critical value of the test statistic using EViews (2)
(f) Draw a picture to show the decision rule for accepting or rejecting the hypothesis (2)
(h) Draw a picture to illustrate the p-value for the test in this case.(2)
MA Econometrics Comprehensive Exam Winter 2015 Exam #
5. Compare the two regressions and comment on which one should be used. If you need additional information
before making your decision, describe the information and how you would obtain it. (6)
6. Suppose you had similar data for another year. Could you perform a panel analysis? Why might you want to
perform a panel analysis? (6)
7. Describe the steps that you would need to go through to perform a panel analysis in EViews.(4)
8. Suppose that you added a variable called YEAR1 to your data with YEAR1 = 1 in the first year and 0 in the
second year.
a. Write out an equation that you could estimate to test the hypothesis that the penalty for being FEMALE is
less in the second period than in the first. (4)
9. Suppose that obtaining a BACHELOR’s degree depending on the level of earnings. What econometric problem
would be created? (2)
12. Suppose that you had data on the average hourly earnings for females with bachelor’s degrees every year for the
last 50 years.
a. How would you forecast next year’s earnings for this group of people? Write down a model and describe
how you would do the analysis in EViews. (3)
c. How could you construct an estimate of how good your forecast is likely to be? (4)
13. How is Granger Causality related to the kind of causality we have tried to discover in our cross-section models? (4)
MA COMPREHENSIVE EXAM 2014 Summer EXAM #
DEPARTMENT OF ECONOMICS
GRADUATE MA COMPREHENSIVE EXAMINATION
MICROECONOMICS
1. (30 points) For the case of two goods and two inputs, demonstrate how the production
possibility frontier between the two outputs shows the alternative Pareto efficient
combinations of the two outputs that can be produced with fixed quantities of those
inputs.
MA COMPREHENSIVE EXAM 2014 Summer EXAM #
MICROECONOMICS
2. (30 points) Consider a utility function shown below for two goods, x and y.
U(x, y) = x1/2y1/3
Derive the indirect utility function associated with this direct utility function.
Clearly show all of the steps in your derivation.
MA COMPREHENSIVE EXAM 2014 Summer EXAM #
MICROECONOMICS
3. (40 points) To encourage production in an industry, the government provides a $100 subsidy to
consumers for the purchase of each unit of the industry’s product. The industry is perfectly
competitive and increasing cost.
a. Who benefits from this subsidy in the long run, consumers or producers? Explain as
completely as you can including the nature of any change in producer surplus, i.e., what
does the change in surplus represent. Your analysis should be supported by an appropriate
supply and demand diagram.
b. In the long run, how does the gain in surplus compare to the cost to the government of the
subsidy? Explain and show on your diagram.
c. Will this subsidy produce a deadweight loss in the long run? Explain and show on your
diagram.
MA COMPREHENSIVE EXAM 2014 Summer EXAM #
MACROECONOMICS
MACROECONOMICS
2. Using the IS-MP framework, explain the “impossible trinity,” that is, why a small open
economy cannot have an independent monetary policy with fixed exchange rates and perfect
capital mobility.
MA COMPREHENSIVE EXAM 2014 Summer EXAM #
MACROECONOMICS
3. Explain and demonstrate graphically the concept of Ricardian Equivalence. Does Ricardian
Equivalence hold in practice? Why or why not?
June 2014 MA Comprehensive Econometrics Exam, Page 1 Exam # 1
You must write your entire answer only in the space provided and not on the backs of pages or elsewhere. Write in pencil; erase
completely to change an answer. If you do not understand a question, you may write down what you assume the question is asking and
answer that question.
Please place your initials in front of each of the following statements. No exam without initials by each will be graded.
.________I am familiar with the academic honesty policies of the University, understand them and accept them.
.________I understand that I may use no books, notes, calculators or other materials on the exam.
.________I understand that I may not look at any electronic device during the exam.
.________I understand that I may not look at another student’s paper or attempt to communicate with any student during the exam.
Throughout the whole exam, if you do not have or do not know how to find a number that you need, write down a brief
description of how you would obtain it (possibly with Eviews) or use a reasonable estimate of it.
**REGRESSION #1**
Dependent Variable: GWAGE234
Included observations: 611 after adjustments
**REGRESSION #2**
Dependent Variable: GWAGE234
Included observations: 609 after adjustments
1. List the assumptions about the data that are required to obtain the ordinary least squares coefficients for
Regression #1. Explain briefly.
2. Write down, in words, your interpretation of what the coefficients of GMWAGE and GCPI would show if
the data for Regression #1 were standardized.
3. Show the EViews commands to find the exact significance level (p-value) for a testing that the coefficient
for GCPI in Regression #1 is greater than .20.
4. Show how to test the hypotheses that the coefficient for the effect of GCPI is 3 times the size of the effect
of GMWAGE as a General F-test.
a. Write down an EViews statement to estimate the unrestricted model
c. Write down the test statistic expressed as an equation or formula using variables (2)
d. Write down the expression for finding the critical value of the test statistic using EViews (2)
5. Heteroscedasticity (30)
a. Briefly define heteroscedasticity.
b. Why is it a problem?
6. Autocorrelation
a. Briefly define autocorrelation.
b. Why is it a problem?
8. Before 2002 beer manufacturers (brewers) were not permitted to give beer distributors in Indiana the right
to be the only distributor of their beer in a county (this is called an exclusive territory). All distributors
were permitted to distribute any beer anywhere in the state. The law was changed in 2002 to permit
brewers to grant exclusive territories. The states of Illinois, Kentucky, Ohio and Michigan, surround
Indiana and they never changed their laws about exclusive territories.
a. Carefully define the variables you will need to perform a differences-in-differences analysis
regarding whether or not the change in the law led to higher beer sales in Indiana using a
regression model.
DEPARTMENT OF ECONOMICS
GRADUATE MA COMPREHENSIVE EXAMINATION
February 6, 2014
MICROECONOMICS
1. A. Derive the equation for the ordinary demand function for good X. Express X as a
function of Income and Prices. Show your work.
U = 10 X1/2Y1/2
B. Derive the indirect utility function for this direct utility function. Show your work.
MA COMPREHENSIVE EXAM 2014 Winter EXAM # 1
MICROECONOMICS
A. Under what conditions, if any, will the loss created by a per unit tax on the good
produced by the industry consist of each of the following:
a) only consumer surplus,
b) consumer and producer surplus,
c) only producer surplus.
B. Is (are) there any condition, or conditions, under which there would be no deadweight
loss created? Explain.
MA COMPREHENSIVE EXAM 2014 Winter EXAM # 1
MICROECONOMICS
3. Suppose the demand for a good produced by a perfectly competitive, increasing cost
industry decreases. What are the effects of this decrease in demand on profits and factor
returns in the short run and long run? Explain as completely as you can.
MA COMPREHENSIVE EXAM 2014 Winter EXAM # 1
MACROECONOMICS
1. Explain and demonstrate graphically or mathematically the Solow growth model. What
determines growth in the Solow model? What determines living standards (output per
worker) in the Solow model? Explain whether the rate of growth can be permanently
increased in the Solow model.
MA COMPREHENSIVE EXAM 2014 Winter EXAM # 1
MACROECONOMICS
2. Explain fully and show graphically the Phillips curve. Explain the difference between the
permanent and accelerationist versions of the Phillips curve. What are the implications of
different theories of expectations (adaptive and rational) for Phillips curve analysis?
MA COMPREHENSIVE EXAM 2014 Winter EXAM # 1
MACROECONOMICS
3. From December 2008 through the present, the Federal Reserve has kept its target federal
funds rate between zero and 0.25%, yet the economic recovery has been very weak.
Using whatever theoretical framework you feel best explains the situation, explain why the
recovery has been so weak.
February 2014 MA Comprehensive Econometrics Exam, Page 1 Exam #
You must write your entire answer only in the space provided and not on the backs of pages or elsewhere. Write in pencil; erase
completely to change an answer. If you do not understand a question, you may write down what you assume the question is asking and
answer that question.
Please place your initials in front of each of the following statements. No exam without initials by each will be graded.
.________I am familiar with the academic honesty policies of the University, understand them and accept them.
.________I understand that I may use no books, notes, calculators or other materials on the exam.
.________I understand that I may not look at any electronic device during the exam.
.________I understand that I may not look at another student’s paper or attempt to communicate with any student during the exam.
Throughout the whole exam, if you do not have or do not know how to find a number that you need, write down a brief
description of how you would obtain it (possibly with Eviews) or use a reasonable estimate of it.
**REGRESSION #1**
Dependent Variable: GWAGE234
Included observations: 611 after adjustments
**REGRESSION #2**
Dependent Variable: GWAGE234
Included observations: 609 after adjustments
1. List the assumptions about the data that are required to obtain the ordinary least squares coefficients for
Regression #1. Explain briefly.
2. Write down, in words, your interpretation of what the coefficients of GMWAGE and GCPI would show if
the data for Regression #1 were standardized.
3. Show the EViews commands to find the exact significance level (p-value) for a testing that the coefficient
for GCPI in Regression #1 is greater than .20.
4. Show how to test the hypotheses that the coefficient for the effect of GCPI is 3 times the size of the effect
of GMWAGE as a General F-test.
a. Write down an EViews statement to estimate the unrestricted model
c. Write down the test statistic expressed as an equation or formula using variables (2)
d. Write down the expression for finding the critical value of the test statistic using EViews (2)
5. Heteroscedasticity (30)
a. Briefly define heteroscedasticity.
b. Why is it a problem?
6. Autocorrelation
a. Briefly define autocorrelation.
b. Why is it a problem?
8. Before 2002 beer manufacturers (brewers) were not permitted to give beer distributors in Indiana the right
to be the only distributor of their beer in a county (this is called an exclusive territory). All distributors
were permitted to distribute any beer anywhere in the state. The law was changed in 2002 to permit
brewers to grant exclusive territories. The states of Illinois, Kentucky, Ohio and Michigan, surround
Indiana and they never changed their laws about exclusive territories.
a. Carefully define the variables you will need to perform a differences-in-differences analysis
regarding whether or not the change in the law led to higher beer sales in Indiana using a
regression model.
Note that if you will be allotted one hour to complete the exam.
MA COMPREHENSIVE EXAM 2013 Summer EXAM #
MICROECONOMICS
1. Consider a utility maximizing individual who consumes x and y. Suppose the price of x
increases. How much additional income is necessary to compensate for this price increase.
Show your answer graphically.
MA COMPREHENSIVE EXAM 2013 Summer EXAM #
MICROECONOMICS
MICROECONOMICS
MACROECONOMICS
Answer two questions:
1. Assume a growth model where knowledge is produced endogenously. What are the
implications of different assumption about returns to scale of knowledge production
for growth? Demonstrate mathematically or graphically and explain completely.
2. Demonstrate graphically and explain the effectiveness of monetary and fiscal policy
when a country has a fixed exchange rate and perfect capital mobility. Relate your
answer to the current problems of European Union countries. How would leaving
the Euro currency help countries like Greece and Spain? Demonstrate graphically
and explain.
3. Central banks that target inflation set their inflation targets above zero. Why?
Why do central banks fear deflation? How does deflation limit the effectiveness of
central bank interest rate policy? Show the effect of deflation in a graphical or
mathematical model and explain.
DEPARTMENT OF ECONOMICS
GRADUATE COMPREHENSIVE EXAMINATION
January 3, 2013
YOUR EXAM #
Note that if you are taking one or two sections only, you will be allotted one hour
per section to complete the exam. Please turn in one exam at the end of each
hour.
MA Macroeconomics Comprehensive Exam January 3, 2013
1. In the Solow growth model, does an increase in the saving rate increase long‐run growth?
Explain and demonstrate graphically. In this model, what factors determine the long‐run growth
of real output? What factor(s) determines the growth of real GDP per capita? According to the
Solow model, why is China growing at 9% annually while the U.S. grows at 3% or less annually?
2. The Phillips curve was originally believed to represent a permanent trade off between
unemployment and inflation. Demonstrate graphically and discuss the implications of the
permanent trade off Phillips curve. Next, show and explain how the accelerationist theory
changed understanding of the Phillips curve. Finally, what are the implications of rational
expectations for the Phillips curve? If expectations are rational, what is the cost of a credible
policy of reducing inflation? Discus and demonstrate graphically.
Econometrics Comprehensive Exam January 2013 Exam 5 Page 1
**REGRESSION #2**
Dependent Variable: RESID^2
Included observations: 117
**REGRESSION #3**
Dependent Variable: RESID
Included observations: 117
**REGRESSION #4**
Dependent Variable: STARTS
Included observations: 116 after adjustments
**REGRESSION #5**
Dependent Variable: STARTS
Included observations: 117 after adjustments
1. (a) Write down the 95% confidence interval for the size of the effect of SENTIMENT on STARTS in Regression #1
using variables but not numbers. (b) Then write down the interval with the numbers (But do not complete the calculations).
2. Test the hypothesis that the coefficient for the effects of UNRATE is three times the size of the one for SENTIMENT in
Regression #1 but opposite in sign using a general F-test by sing the follwing steps:
(c) Write down the equation for the test statistic using variables but not numbers.
(d) Write down the equation for the test statistic inserting numbers in place of variables (but do not complete the
calculation). If you do not have a number tell how you could get it.
(e) Write down the expression for finding the critical value of the test statistic using EViews.
(f) Below draw a frequency distribution diagram and use it to explain the test you performed above. Be sure to
label the axes clearly.
(g) In the diagram that you drew above to show the meaning of the “p” value (exact significance level) for the test.
(h) Write down the expression for finding the p-value of the test statistic using EViews
3. (a) Use the numbers in Regression #6 to sketch a graph of the relationship between SENTIMENT and STARTS.
Econometrics Comprehensive Exam January 2013 Exam 5 Page 5
4. The Eviews commands below can be used to test for an econometric problem in Regression #1. Fill in the table entries
SORT UNRATE
SMPL 2001.01 2005.06
LS STARTS C UNRATE EMPLOYMENT SENTIMENT
Values needed from this regression:
SMPL 2006.04 2010.09
LS STARTS C UNRATE EMPLOYMENT SENTIMENT
Values needed from this regression:
Test Name Econometric problem Test statistic (equation) Critical value (Eviews expression)
5. a. Write an equation to use the DW in Regression #1 to estimate a value of the autocorrelation coefficient, rhohat.
c. Write out the GLS equation you would estimate to correct any autocorrelation present in the Regression #1.
6. What is the name of a test you could use to determine whether UNRATE alone or EMPLOYMENT and SENTIMENT
alone is the better way to model STARTS?
7. What are the possible outcomes of the test? Use the following table to summarize.
b. How are Adjusted R-squared,and the Akaike, Schwarz and Hannan-Quinn criteria all related to each other?
c. Eviews regression output normally shows 9 measures related to “goodness of fit”. Why do we have more than one
goodness of fit measure?
Econometrics Comprehensive Exam January 2013 Exam 5 Page 6
9. a. What does the concept of “stability” mean in the context of econometric models?
What is the major difference between a Chow test and examination of recursive estimates of the coefficients of an
equation?
MICROECONOMICS
MICROECONOMICS
2. Show graphically and mathematically that the demand curve for an inferior good may or
may not be downsloping. Explain.
MA/MS COMPREHENSIVE EXAM 2012J EXAM #
MICROECONOMICS
3. Consider a perfectly competitive, constant cost industry with 100 firms. Firms are profit
maximizers and have the following total short-run costs:
STC = q2 + q + 10 .
QD = 1050 - 50 p .
a. What is the short-run equilibrium price, industry output and firm profit? Construct a
diagram showing the firm and a diagram showing short-run market equilibrium.
b. What can you say about the long-run equilibrium relative to the short-run equilibrium?
MA/MS COMPREHENSIVE EXAM 2012J EXAM #
MACROECONOMICS
1. Explain and demonstrate graphically the Solow growth model. In the Solow model, if the
saving rate is below “Golden Rule” level of consumption, why might it be difficult to reach
this equilibrium? Demonstrate the consequence of increasing saving on the time path of
consumption graphically. How does the increase in saving affect the long-run growth
rate?
MA/MS COMPREHENSIVE EXAM 2012J EXAM #
MACROECONOMICS
2. For the case of floating exchange rates and perfect capital mobility, demonstrate
graphically and explain the different effects of a fiscal expansion and of a monetary
expansion in an open and in a closed economy. What different adjustments explain the
different outcomes for these four cases?
MA/MS COMPREHENSIVE EXAM 2012J EXAM #
MACROECONOMICS
1. PLEASE DO NOT OPEN THE EXAM OR TURN PAGES UNTIL YOU ARE ASKED TO DO SO.
2. Please read the following instructions completely before starting to answer the exam questions.
3. Please put all electronic devices (calculators, telephones, pda’s, etc.) away right now so that neither you nor
anyone else can see or hear them.
4. Please put all books, papers, notes, etc. of any kind that you brought into the exam room away right now so
that neither you nor anyone else can see them. You may not refer to any such materials during the exam.
5. During the exam you may neither ask other students questions nor answer questions. If you do not understand
the wording of a question or feel that additional information is needed, write down what you assume to be true
so that you can answer the question asked.
6. You may separate the pages during the exam. If you separate the pages do not attempt to put them back
together, just write your name on each page and submit them all together.
7. Please answer in the space provided only. Please do not write on the backs of the pages or in places other
than the answer spaces.
8. If a calculation is called for, please show only the numbers and the nature of the calculation called for; do not
finish the calculation: e.g., (187.2 / 349.6) is a complete, correct answer.
9. Abbreviate whenever the result is clear. For example, shorten PROSES to PR and PCARN to PC.
10. Round off numbers. For example, do NOT write 6.282986, just write 6.28.
STUDENT CERTIFICATION: I have read the preceding instructions and agree to comply with them.
_____________________________________
Signature
_______________________________
Printed Last Name
____________
Date
Econometrics Comprehensive Exam Summer 2012 Exam # Page 2
**REGRESSION #2**
Dependent Variable: RESID^2
Included observations: 117
**REGRESSION #3**
Dependent Variable: RESID
Included observations: 117
**REGRESSION #4**
Dependent Variable: STARTS
Included observations: 116 after adjustments
**REGRESSION #5**
Dependent Variable: STARTS
Included observations: 117 after adjustments
1. Test the hypothesis that the coefficient for the effects of UNRATE is three times the size of the one for SENTIMENT in
Regression #1 but opposite in sign using a general F-test.
(c) Write down the equation for the test statistic using variables but not numbers. (2)
(d) Write down the equation for the test statistic inserting numbers in place of variables (but do not complete the
calculation). If you do not have a number tell how you could get it. (2)
(e) Write down the expression for finding the critical value of the test statistic using EViews (2)
(f) Write down the decision rule for accepting or rejecting the hypothesis (e.g., if X > Y , reject H0) (2)
(g) Below draw a frequency distribution diagram and use it to explain the test you performed above. (2)
(h) In the diagram that you drew above to show the meaning of the “p” value (exact significance level)for the test. (3).
(i) Write down the expression for finding the p-value of the test statistic using EViews. (3 points)
2. Use the numbers in Regression #6 to sketch a graph of the relationship between SENTIMENT and STARTS. (4)
Econometrics Comprehensive Exam Summer 2012 Exam # Page 6
3. Write down the expression to find a 95% confidence interval for the size of the effect of SENTIMENT on STARTS in
Regression #1. (Do not complete the calculations) (3)
4. The Eviews commands below can be used to test for an econometric problem. Fill in the table entries (8)
SORT UNRATE
SMPL 2001.01 2005.06
LS STARTS C UNRATE EMPLOYMENT SENTIMENT
Values needed from this regression:
SMPL 2006.04 2010.09
LS STARTS C UNRATE EMPLOYMENT SENTIMENT
Values needed from this regression:
Test Name Econometric problem Test statistic (equation) Critical value (Eviews expression)
c. Write out the GLS equation you would estimate to correct any autocorrelation present in the Regression #1.(4)
6. What is the name of a test you could use to determine whether UNRATE alone or EMPLOYMENT and SENTIMENT
alone is the better way to model STARTS? (2)
7. What are the possible outcomes of the test? Use the following table to summarize. (6)
MICROECONOMICS
1. Consider a perfectly competitive, constant cost industry with 100 firms. Each firm has the
following total short-run and long-run costs:
QD = 1050 - 50 p .
MICROECONOMICS
2. Consider a consumer’s utility function shown below for two goods, x and y.
U(x, y) = x1/3y2/3
b. Derive the indirect utility function associated with this direct utility function.
MA/MS COMPREHENSIVE EXAM 2012W EXAM #
MICROECONOMICS
a. How will the burden of the tax be distributed between consumers and producers?
b. What will be the resulting effects of the tax on consumer surplus, producer surplus,
and deadweight loss?
MA/MS COMPREHENSIVE EXAM 2012W EXAM #
MACROECONOMICS
Note: All essay questions in this course will be graded on clarity of expression as well as content.
1. The 2009 stimulus package of nearly $1 trillion was composed of about one-third
additional government spending, one-third temporary tax rebates and one-third transfer
payments. The likely effectiveness of the stimulus was debated between economists.
a. Describe the effects these three changes (government spending, tax rebates and
transfers) should have on the real economy according to the real business cycle
(dynamic general equilibrium) model. Was the stimulus package desirable
according to this model? Explain.
b. Describe the effects these three changes should have on current output and
employment based on the Keynesian model. State all assumptions. Was the
stimulus desirable according to this model? Explain.
c. The effectiveness of the stimulus remains controversial. Discuss the evidence for
and against in context of the models described above.
MA/MS COMPREHENSIVE EXAM 2012W EXAM #
MACROECONOMICS
2. At its recent meeting the Federal Reserve Open Market Committee made several
announcements. (1) The expectation is that the Fed will keep interest rates very low
until the end of 2014 (2) That it will keep inflation at 2% and (3) The committee
announced that it would release individual forecasts of future interest rates by each
member attending the FOMC meetings.
a. According to the rational expectations model put forth by Sargent and Wallace
(1975) what will be the outcome of this policy for output and inflation? What
assumptions do they make that are unrealistic, if any? Discuss.
b. Can these actions be explained in terms inflation targeting that Bernanke is known to
support? Are these actions appropriate for the US? If they are appropriate, explain
why it has taken so long for the Fed to take these actions.
MA/MS COMPREHENSIVE EXAM 2012W EXAM # 5
Page 1 ECONOMETRICS
1. Please read the following instructions completely before starting to answer the exam questions.
2. Please put all electronic devices (calculators, telephones, pda’s, etc.) away right now so that neither you nor
anyone else can see or hear them.
3. Please put all books, papers, notes, etc. of any kind that you brought into the exam room away right now so
that neither you nor anyone else can see them. You may not refer to any such materials during the exam.
4. During the exam you may neither ask other students questions nor answer questions. If you do not understand
the wording of a question or feel that additional information is needed, write down what you assume to be true
so that you can answer the question asked.
5. You may separate the pages during the exam. If you separate the pages do not attempt to put them back
together, just write your name on each page and submit them all together.
6. Please answer in the space provided only. Please do not write on the backs of
the pages or in places other than the answer spaces.
7. If a calculation is called for, please show only the numbers and the nature of the calculation called for; do not
finish the calculation: e.g., (187.2 / 349.6) is a complete, correct answer.
8. Abbreviate whenever the result is clear. For example, shorten Manufacturing Employment in The local area
to EMP-DE.
9. Round off numbers. For example, do NOT write 6.282986, just write 6.28.
STUDENT CERTIFICATION: I have read the preceding instructions and agree to comply with them.
_______________________________
Printed Code Name
NATIONAL_EMPLOYMENT C
NATIONAL_EMPLOYMENT 1.05E-08 8.02E-07 -0.000495
LOCAL_LABOR_FORCE 8.02E-07 0.000131 -0.067754
C -0.000495 -0.067754 36.25284
MA/MS COMPREHENSIVE EXAM 2012W EXAM # 5
Page 2 ECONOMETRICS
Bivariate
Correlations LOCAL_EMPLOYMENT NATIONAL_EMPLOYMENT LOCAL_LABOR_FORCE
LOCAL_EMPLOYMENT 1.000000 0.970973 -0.759911
NATIONAL_EMPLOYMENT 0.970973 1.000000 -0.724678
LOCAL_LABOR_FORCE -0.759911 -0.724678 1.000000
NATIONAL_EMPLOYME
NT 0.002374 8.20E-05 28.96576 0.0000
LOCAL_LABOR_FORCE -0.041772 0.010771 -3.878019 0.0002
C 18.11773 5.550238 3.264316 0.0014
NATIONAL_EMPLOYME
NT 0.002374 0.000109 21.84233 0.0000
LOCAL_LABOR_FORCE -0.041772 0.012173 -3.431542 0.0008
C 18.11773 6.551689 2.765353 0.0066
NATIONAL_EMPLOYME
NT 2.98E-05 7.29E-05 0.409378 0.6831
LOCAL_LABOR_FORCE 0.003253 0.009572 0.339909 0.7346
C -1.841731 4.935929 -0.373128 0.7098
RESID(-1) 0.396558 0.095737 4.142175 0.0001
MA/MS COMPREHENSIVE EXAM 2012W EXAM # 5
Page 5 ECONOMETRICS
NATIONAL_EMPLOYME
NT 0.002463 0.000119 20.62726 0.0000
LOCAL_LABOR_FORCE -0.037078 0.014863 -2.494624 0.0141
C 14.83405 7.589638 1.954513 0.0531
AR(1) 0.467059 0.081355 5.741027 0.0000
1. Use a 6 step procedure to test the hypothesis that there is no monthly seasonality in the relationship between The
local area manufacturing employment and the group of variables: the constant, the local labor force and national
manufacturing employment. (6)
1.
2.
3.
4.
5.
MA/MS COMPREHENSIVE EXAM 2012W EXAM # 5
Page 6 ECONOMETRICS
6.
2. Show an equation (and substitute the numbers into it) for calculating the new value for the coefficient for
manufacturing employment in the nation.in Regression #2 if local manufacturing employment was measured in
hundreds and manufacturing employment in the NATION was measured in millions. (4)
The following EViews commands were used to create the variable DUMMY shown in the data:
GENR DUMMY = 0
SMPL IF NATIONAL_EMPLOYMENT > @MEAN(NATIONAL_EMPLOYMENT)
GENR DUMMY = 1
SMPL @ALL
4. Describe briefly the way in which generalized least squares (GLS) eliminates some econometric problems.(2)
a. Explain the application of GLS to the case of autocorrelation by writing out a regression equation.(2)
b. How do you perform Estimated or Feasible GLS (EGLS) for autocorrelation in EViews?
MA/MS COMPREHENSIVE EXAM 2012W EXAM # 5
Page 7 ECONOMETRICS
c. Write a regression equation that explain the application of GLS to the case of heteroscedasticity.
0
RESID
-1
-2
-3
-4
11,000 12,000 13,000 14,000 15,000 16,000 17,000 18,000
MANUFACT_EMP_US
5. What econometric problem might be identified from the graph above? Explain. (2)
c. Based on the graph above describe how you could implement EGLS. (2)
f. Another solution to the problem of heteroscedasticity has been implemented in Regression #______ (1)
g. Name of solution:______________________________(1)
6. Test the hypothesis that there is no autocorrelation in the relationship between The local area manufacturing
employment and the group of variables, The local area labor force and national manufacturing employment. (6)
1.
2.
MA/MS COMPREHENSIVE EXAM 2012W EXAM # 5
Page 8 ECONOMETRICS
3.
4.
5.
6.
7. Sketch the frequency distribution of the test statistic showing the actual mean value, the approximate critical
regions and the actual value of the test statistic.(3)
8. Explain briefly how the figure above can be used to detect autocorrelation.(3)
a. Compare this approach with the ones taken in questions 7 and 9.(2)
10. Name a test to decide whether (a) manufacturing employment in the NATION plus a constant or (b) the labor
force in The local area plus a constant provides, the best explanation of variation in manufacturing employment in
The local area. (Set it up but do not complete the calculations)(4).
11. Do you have the information needed to perform the Ramsey regression specification error test (RESET)? If not
write down the series of EViews commands to describe the procedures you need to execute in order to have the
information that you need for the test. (3).
MA/MS COMPREHENSIVE EXAM 2011J EXAM NUMBER________________
MICROECONOMICS
1. (40 points) To encourage production in an industry, the government provides a $100 subsidy to
consumers for the purchase of each unit of the industry’s product. The industry is perfectly
competitive and increasing cost.
a. Who benefits from this subsidy in the long run, consumers or producers? Explain as
completely as you can including the nature of any change in producer surplus. Your
analysis should be supported by an appropriate diagram or diagrams.
b. In the long run, how does the gain in surplus compare to the cost to the government of
the subsidy? Explain and show on your diagram.
c. Will this subsidy produce a deadweight loss in the long run? Explain and show on your
diagram.
MA/MS COMPREHENSIVE EXAM 2011J EXAM NUMBER________________
MICROECONOMICS
2. (30 points) Equity and Efficiency Criteria. Using a two-person-two-good Edgeworth Box
diagram, demonstrate the difference between equity and efficiency criteria. What is the condition
for Pareto Efficiency in this context? Explain.
MA/MS COMPREHENSIVE EXAM 2011J EXAM NUMBER________________
MICROECONOMICS
3. (30 points) Derive the indirect utility function for the following direct utility function. Show
all of the steps in your derivation. (Note that this is not a Cobb-Douglas utility function.)
U=xy
MA/MS COMPREHENSIVE EXAM 2011J EXAM NUMBER________________
MACROECONOMICS
1. Explain and demonstrate graphically the effects of monetary and fiscal policy for a small country
with perfect capital mobility and fixed exchange rates. Next, apply this to the case of Greece,
which is part of the Euro zone (a system of fixed exchange rates) and suffers from a recession
and fiscal/debt crisis with sovereign debt at 150% of GDP. What feasible policy option or
options does Greece have to reduce unemployment? What are the implications of your
recommendation?
MA/MS COMPREHENSIVE EXAM 2011J EXAM NUMBER________________
MACROECONOMICS
2. In the past two decades there have been extensive discussions about policy ‘rules” Many
countries have adopted ‘inflation targeting”, but the US has not formally adopted a policy rule.
On the other hand, Bernanke is a supporter of ‘inflation targeting,” as his academic writings
before going to the Fed illustrate. Recently the Fed has included the following statement in
every one of its recent FOMC announcements: “exceptionally low levels for the federal funds rate
for an extended period.” To what extent does the inclusion of such a statement accomplish some of
the objectives of following a formal policy rule?
Econometrics Comprehensive Exam, June 2011 Exam Number______________________________________ Page 1
1. Please read the following instructions completely before starting to answer the exam questions.
2. Please put all electronic devices (calculators, telephones, pda’s, etc.) away right now so that neither you nor
anyone else can see or hear them.
3. Please put all books, papers, notes, etc. of any kind that you brought into the exam room away right now so
that neither you nor anyone else can see them. You may not refer to any such materials during the exam.
4. During the exam you may neither ask other students questions nor answer questions. If you do not understand
the wording of a question or feel that additional information is needed, write down what you assume to be true
so that you can answer the question asked.
5. You may separate the pages during the exam. If you separate the pages do not attempt to put them back
together, just write your name on each page and submit them all together.
6. Please answer in the space provided only. Please do not write on the backs of
the pages or in places other than the answer spaces.
7. If a calculation is called for, please show only the numbers and the nature of the calculation called for; do not
finish the calculation: e.g., (187.2 / 349.6) is a complete, correct answer.
8. Abbreviate whenever the result is clear. For example, shorten Manufacturing Employment in The local area
to EMP-DE.
9. Round off numbers. For example, do NOT write 6.282986, just write 6.28.
STUDENT CERTIFICATION: I have read the preceding instructions and agree to comply with them.
_______________________________
Printed Code Name
NATIONAL_EMPLOYMENT C
NATIONAL_EMPLOYMENT 1.05E-08 8.02E-07 -0.000495
LOCAL_LABOR_FORCE 8.02E-07 0.000131 -0.067754
C -0.000495 -0.067754 36.25284
Econometrics Comprehensive Exam, June 2011 Exam Number______________________________________ Page 2
Bivariate
Correlations LOCAL_EMPLOYMENT NATIONAL_EMPLOYMENT LOCAL_LABOR_FORCE
LOCAL_EMPLOYMENT 1.000000 0.970973 -0.759911
NATIONAL_EMPLOYMENT 0.970973 1.000000 -0.724678
LOCAL_LABOR_FORCE -0.759911 -0.724678 1.000000
NATIONAL_EMPLOYME
NT 0.002374 8.20E-05 28.96576 0.0000
LOCAL_LABOR_FORCE -0.041772 0.010771 -3.878019 0.0002
C 18.11773 5.550238 3.264316 0.0014
NATIONAL_EMPLOYME
NT 0.002374 0.000109 21.84233 0.0000
LOCAL_LABOR_FORCE -0.041772 0.012173 -3.431542 0.0008
C 18.11773 6.551689 2.765353 0.0066
NATIONAL_EMPLOYME
NT 2.98E-05 7.29E-05 0.409378 0.6831
LOCAL_LABOR_FORCE 0.003253 0.009572 0.339909 0.7346
C -1.841731 4.935929 -0.373128 0.7098
RESID(-1) 0.396558 0.095737 4.142175 0.0001
Econometrics Comprehensive Exam, June 2011 Exam Number______________________________________ Page 5
NATIONAL_EMPLOYME
NT 0.002463 0.000119 20.62726 0.0000
LOCAL_LABOR_FORCE -0.037078 0.014863 -2.494624 0.0141
C 14.83405 7.589638 1.954513 0.0531
AR(1) 0.467059 0.081355 5.741027 0.0000
1. Use a 6 step procedure to test the hypothesis that there is no monthly seasonality in the relationship between The
local area manufacturing employment and the group of variables: the constant, the local labor force and national
manufacturing employment. (6)
1.
2.
3.
4.
5.
Econometrics Comprehensive Exam, June 2011 Exam Number______________________________________ Page 6
6.
2. Show an equation (and substitute the numbers into it) for calculating the new value for the coefficient for
manufacturing employment in the nation.in Regression #2 if local manufacturing employment was measured in
hundreds and manufacturing employment in the NATION was measured in millions. (4)
The following EViews commands were used to create the variable DUMMY shown in the data:
GENR DUMMY = 0
SMPL IF NATIONAL_EMPLOYMENT > @MEAN(NATIONAL_EMPLOYMENT)
GENR DUMMY = 1
SMPL @ALL
4. Describe briefly the way in which generalized least squares (GLS) eliminates some econometric problems.(2)
a. Explain the application of GLS to the case of autocorrelation by writing out a regression equation.(2)
b. How do you perform Estimated or Feasible GLS (EGLS) for autocorrelation in EViews?
Econometrics Comprehensive Exam, June 2011 Exam Number______________________________________ Page 7
c. Write a regression equation that explain the application of GLS to the case of heteroscedasticity.
0
RESID
-1
-2
-3
-4
11,000 12,000 13,000 14,000 15,000 16,000 17,000 18,000
MANUFACT_EMP_US
5. What econometric problem might be identified from the graph above? Explain. (2)
c. Based on the graph above describe how you could implement EGLS. (2)
f. Another solution to the problem of heteroscedasticity has been implemented in Regression #______ (1)
g. Name of solution:______________________________(1)
6. Test the hypothesis that there is no autocorrelation in the relationship between The local area manufacturing
employment and the group of variables, The local area labor force and national manufacturing employment. (6)
1.
2.
Econometrics Comprehensive Exam, June 2011 Exam Number______________________________________ Page 8
3.
4.
5.
6.
7. Sketch the frequency distribution of the test statistic showing the actual mean value, the approximate critical
regions and the actual value of the test statistic.(3)
8. Explain briefly how the figure above can be used to detect autocorrelation.(3)
a. Compare this approach with the ones taken in questions 7 and 9.(2)
10. Name a test to decide whether (a) manufacturing employment in the NATION plus a constant or (b) the labor
force in The local area plus a constant provides, the best explanation of variation in manufacturing employment in
The local area. (Set it up but do not complete the calculations)(4).
11. Do you have the information needed to perform the Ramsey regression specification error test (RESET)? If not
write down the series of EViews commands to describe the procedures you need to execute in order to have the
information that you need for the test. (3).
MA/MS COMPREHENSIVE EXAM 2011W EXAM NUMBER________________
MICROECONOMICS
1. (30 points) Consider an increasing cost perfectly competitive industry which is in long-run
equilibrium. Suppose that a per unit excise tax is imposed. Use diagrams and discussion to
explain answers the following questions.
a. What determines the distribution of the burden of this tax between consumers and
producers?
b. What is deadweight loss in this case? Show how it can be represented in a diagram
for this case.
MA/MS COMPREHENSIVE EXAM 2011W EXAM NUMBER________________
MICROECONOMICS
Q = Q( k, l, t ) ,
where k, l, and t are capital, labor and land respectively and v, w, and s are the prices of
capital, labor and land respectively.
Demonstrate mathematically that minimizing the cost of producing Q will result in the
following.
MICROECONOMICS
y = 0.7 I Py-1 .
MACROECONOMICS
1. Explain and demonstrate graphically the Solow growth model. According to this model, what
policies can increase the long‐run growth rate? What policies can affect living standards?
Explain and show graphically your answers to all parts of the question.
MA/MS COMPREHENSIVE EXAM 2011W EXAM NUMBER________________
MACROECONOMICS
2. Greece is experiencing an economic crisis with 13.5% unemployment due to its fiscal problems.
In 2009 its budget deficit was 13.6% of GDP. Since Greece has adopted the Euro, it has no
independent monetary policy. As the Euro is like a system of fixed exchange rates, explain and
show graphically why a country with a fixed exchange rate cannot pursue an independent
monetary policy (the large country exception does not apply to Greece). In this case, what
policy can be used to reduce unemployment? Is this an option for Greece? Explain?
MA/MS COMPREHENSIVE EXAM 2011W EXAM NUMBER________________
MACROECONOMICS
3. The Federal Reserve has kept its target interest rate between zero and 0.25% for two years.
Explain and demonstrate this situation graphically. Given this situation, can monetary policy do
more to stimulate aggregate spending? Relate your answer to the decision to extend the Bush
tax cuts and cut employee social security contributions for two years. Show graphically and
explain the intended effects of these tax policies.
Econometrics Comprehensive Exam January 2011, Name: Last, First ______________________________________ Page 1
**REGRESSION #2**
Dependent Variable: RESID^2
Included observations: 117
**REGRESSION #3**
Dependent Variable: RESID
Included observations: 117
**REGRESSION #4**
Dependent Variable: STARTS
Included observations: 116 after adjustments
**REGRESSION #5**
Dependent Variable: STARTS
Included observations: 117 after adjustments
1. (a) Write down the 95% confidence interval for the size of the effect of SENTIMENT on STARTS in Regression #1
using variables but not numbers. (b) Then write down the interval with the numbers (But do not complete the calculations).
2. Test the hypothesis that the coefficient for the effects of UNRATE is three times the size of the one for SENTIMENT in
Regression #1 but opposite in sign using a general F-test by sing the follwing steps:
(c) Write down the equation for the test statistic using variables but not numbers.
(d) Write down the equation for the test statistic inserting numbers in place of variables (but do not complete the
calculation). If you do not have a number tell how you could get it.
(e) Write down the expression for finding the critical value of the test statistic using EViews.
(f) Below draw a frequency distribution diagram and use it to explain the test you performed above. Be sure to
label the axes clearly.
(g) In the diagram that you drew above to show the meaning of the “p” value (exact significance level) for the test.
(h) Write down the expression for finding the p-value of the test statistic using EViews
3. (a) Use the numbers in Regression #6 to sketch a graph of the relationship between SENTIMENT and STARTS.
Econometrics Comprehensive Exam January 2011, Name: Last, First ______________________________________ Page 5
4. The Eviews commands below can be used to test for an econometric problem in Regression #1. Fill in the table entries
SORT UNRATE
SMPL 2001.01 2005.06
LS STARTS C UNRATE EMPLOYMENT SENTIMENT
Values needed from this regression:
SMPL 2006.04 2010.09
LS STARTS C UNRATE EMPLOYMENT SENTIMENT
Values needed from this regression:
Test Name Econometric problem Test statistic (equation) Critical value (Eviews expression)
5. a. Write an equation to use the DW in Regression #1 to estimate a value of the autocorrelation coefficient, rhohat.
c. Write out the GLS equation you would estimate to correct any autocorrelation present in the Regression #1.
6. What is the name of a test you could use to determine whether UNRATE alone or EMPLOYMENT and SENTIMENT
alone is the better way to model STARTS?
7. What are the possible outcomes of the test? Use the following table to summarize.
b. How are Adjusted R-squared,and the Akaike, Schwarz and Hannan-Quinn criteria all related to each other?
c. Eviews regression output normally shows 9 measures related to “goodness of fit”. Why do we have more than one
goodness of fit measure?
Econometrics Comprehensive Exam January 2011, Name: Last, First ______________________________________ Page 6
9. a. What does the concept of “stability” mean in the context of econometric models?
What is the major difference between a Chow test and examination of recursive estimates of the coefficients of an
equation?