A. True/False

Note: You do not need to explain your answers in this section.

02. [T/F] (2pt) We need to set a base year in order to calculate CPI, but we don't need to set a base year when we calculate the inflation rate.

03. [T/F] (2pt) The basket of goods used to calculate CPI and inflation rate in the United States is the same as the basket used in China.

04. [T/F] (2pt) If the nominal wage rate in 2020 is twice as much as in 2019 for each individual in the country, we can claim that 2020 is a btter year than 2019.

0S. [T/F] (2pt) The Goods Market Model connects the following sectors of the economy: Households, Firms, Government, Financial Institutions, and the Rest of the World.

06. [T/F] (2pt) A long-run model in macroeconomics studies the steady change in aggregate output and also the flucuations in aggregate output.

07. [T/F] (2pt) In the United States, the rich spend more money than the poor so their marginal propensity to consume is higher than the poor.

07. [T/F] (2pt) In the United States, the largest component of the GDP is investment.

08. [T/F] (2pt) Recall that the linear consumption function is where is the disposable income. In our goods market model, we assume to be between and .

09. [T/F] (2pt) In the standard goods market model we learned in class, if investment goes up by 1 dollar, the equilibrium output definitely goes up by more than 1 dollar. The amount by which the equilibrium output goes up is equal to the multiplier for investment.

10. [T/F] (2pt) In the standard goods market model we learned in class, if tax goes up by 1 dollar, the equilibrium output definitely goes down by more than 1 dollar. The amount by which the equilibrium output goes down is equal to the multiplier for tax.

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11. [T/F] (2pt) In the goods market we learned in class, the investment does not depend on income Y. Let's change this assumption and instead assume that investment goes up when income goes up. In this new model, if the government spending goes up by 1 dollar, the equilibrium output should go up by more than

dollar, where is the marginal propensity to consume.

12. [T/F] (2pt) Confidence about the future economy condition (animal spirit) does not matter for a country's GDP in the short run.

13. [T/F] (2pt) Aggregate saving is an endogeneous variable in the goods market model because government saving, one component of the aggregate saving, depends on the variable of interest, output Y.

14. [T/F] (2pt) If a country exports more goods than what it imports from abroad then this country would also have more capital inflow than capital outflow.

1S. [T/F] (2pt) Suppose the price for a one-year bond is 900 dollars and the face value is 1000 dollars, the interest rate is exactly 10%.

16. [T/F] (2pt) Money demand is a decreasing function of interest rate , and money supply is an increasing function of interest rate .

17. [T/F] (2pt) In the United States, if the Fed sells 1 dollar worth of government bonds, the money supply increases by more than 1 dollar. The increase is equal to money multiplier.

18. [T/F] (2pt) In the United States, if the Fed buys 1 dollar worth of government bonds, the money supply increases by more than 1 dollar. The increase is equal to money multiplier.

19. [T/F] (2pt) In China, mobile payment, such as WechatPay and AliPay, has become more and more popular. People need to hold less and less currencies. This will decrease money multiplier in China.

20. [T/F] (2pt) Every point on the LM curve is a goods market equilibrium, and every point on the IS curve is a money market equilibrium.