Université d'Orléans - Année universitaire 2014-2015 Faculté de Droit, Économie et Gestion

Licence Economie Gestion (Voie Européenne) – semestre 2 Macroeconomics 10 mars 2014 Exam #1 Aucun document autorisé Calculatrice autorisée Exercise 1 : Measuring GDP (5 points) You have four firms in your economy. - Firm A extracts and sells coal to firms B (100 000€) and C (200000€). Total wages are 100000€. - Firm B sells robots to other firms. She uses 200000€ of coal and sells robots for 500000€ to firm C. She pays 100000€ of wages. - Firm C sells cars to consumers. The value of the production is 800000€. She pays 200000 of wages and buys 200000€ of coal to firm A, and 500000€ of robots to firm B. 1. Calculate the GDP using the production approach. (1 point) 2. Calculate the GDP using value-added approach. (1.5 points) 3. Calculate the level of wages and profit. Calculate the GDP using the income approach. (1.5 points) 4. Calculate the labour share (total wages / GDP). Is it consistent with what is observed in industrialized countries ? (1 point). Exercise 2 : Keynesian Consumption Function (10 points) The general consumption function is C= 0.8Yd + 10 with C the level of Consumption and Yd the disposable income. The level of taxes is 10. 1. What does the value 0.8 represent ? 10 ? Explain. (1 point). 2. Why it is a Keynesian consumption function ? (1 point) 3. Determine the saving function. (1 point) 4. What is the different vision of savings between Keynes and the Classics ? (1 point) 5. Draw on the same graph the consumption line and the saving line. (1 points) 6. Give the average propensity to consume (APC) and the marginal propensity to consume (MPC). How do these propensities move when Y rises ? (1.5 points) 7. Give the average propensity to save (APS) and the marginal propensity to save (MPS). How do these propensities move when Y rises ? (1.5 points) 8. What will be an impact of a tax increase ? Explain the economic effect and show it graphically. How are

affected the APC and MPC ? Give the new saving and consumption functions with T=12. (2 points). Exercise 3 : Life cycle Hypothesis (3 points) M. George works between 20 and 60 years-old. His life expectancy is 90 years-old. He earns 50000€ per year. We do not take into account his consumption before his 20 years-old (we assume his parents have financed his consumption). 1. According to the life cycle theory , what will be his annual consumption during his working life ? When he will be retired ? What will be his average propensity to consume (during his working life) ? (1 point) 2. After a wage increase, the annual wage is 60000€ per year. What will be his consumption and average propensity to consume ? (1 point) 3. Based on what you found, explain the main difference between the life cycle theory and the keynesian consumption theory. (1 point) Exercise 4 : Investment (2 points) You want to buy an apartment. The cost is 100000€. According to the real estate agent, you can sell it for 150000€ in five years. The interest rate of the economy is 10 %. You plan to live in this apartment so you do not expect additional income during the 5 years (except the value of the apartment when you will sell it in five years). 1) You have to borrow the 100000€. Is the investment profitable ? Justify. (1 point) 2) Suppose now that you have enough savings to buy this apartment without borrowing. Is the investment profitable ? Justify and explain what are the differences with the previous question. (1 point).