1. You are about to sit an online assessment
You have a 24-hour period in which to complete this exam. This 24-hour period is the time
during which you can arrange to take the exam. It is NOT the length of the exam.
2. Advice on the contents of the exam and technical support
In case you should have questions about the contents of this paper, or you require technical
assistance, please contact our virtual invigilation team at the UofG Helpdesk.
Questions relating to the contents of the paper should be raised within the first 3 hours of the
assessment period, when an academic member of staff will be available to answer these.
Technical support will be available 24 hours per day. To ensure timely responses and that all
students receive the same information, you should not contact academic staff directly but
instead use the Helpdesk.
3. Completing the exam paper
It should take you no longer than 2 hours to complete this exam and you should pay specific
attention to guidance provided on the exam paper regarding the total word count.
You should be able to complete the exam in the time indicated and are unlikely to derive
major benefits from taking longer. Note that spending longer often leads to muddled answers
which do not receive high grades. It is better to answer in a clear and concise fashion within
the time limit given.
4. Time adjustments for students with disabilities
If you are normally granted adjustments to your exam time through the University’s
Disability Service, allowance is made for these since you have a 24-hour period in which to
complete this exam.
5. Enlarging the text
In case you should need to enlarge the text of a PDF document:
Open Adobe Acrobat; click on the VIEW tab; click on ZOOM and then ZOOM TO; select the
desired magnification level.
6. Planning your time
When planning your time, you should allocate 30 minutes to download the exam paper and a
further 30 minutes to upload your answers to Moodle at the end of the exam. This is
important as these times give you the ability to report any problems within the 24-hour exam
availability period.
7. Submitting your answers
Acceptable file types for submitting typed documents are: DOC/DOCX; RTF; PDF;
XLS/XLSX
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In case you are unable to upload your answers to Moodle you may email them to: businessschool-assessment@glasgow.ac.uk.
• Only one file should be submitted per question.
• Ensure you save your document using your student ID, course code and question
number, e.g 7299019_MGT5317_1.
8. Declaration of Academic Integrity
Your answers must entirely be your own work. During the 24-hour period that this exam is
active, you must not for any reason communicate or collude with other students taking this
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Continued Overleaf
exam. Note that your exam papers may be processed through Turnitin for plagiarism
checking. We may also conduct a further oral examination to check your knowledge and
establish that the exam answers are your own.
This declaration incorporates the University’s Declaration of Originality which applies to all
academic work (see below).
9. Declaring that the work is your own
By selecting the check box to open the exam paper, you have agreed to both this declaration
and the University’s Declaration of Originality.
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Continued Overleaf
Section A
You must answer ONE question from this section (Weighting noted against
each sub-question). The word limit per question is 750 words maximum. Anything
you write once you have reached the word limit will not be marked.
Question 1
1.1 Based on Nordhaus’ Election-Cycle Theory, the leading party of the current government will try to be re-elected by using certain economic policies, thus moving the economy
through different types of business cycles. Imagine a scenario in which a new leading party
has just been elected and that the economy is experiencing a boom. Starting fom this point
in time, explain the policy tools leading politicians will use to be re-elected again and explain
the effects such economic policies have on the different types of business cycles. Make sure
to discuss the effect of the party’s policies on prices, wages, unemployment, good demand
| and production output. Please provide a graphic fr your explanation. | [30%] |
| 1.2 Empirically, the Election-Cycle Theory is not relevant. Explain two possible reasons | |
| fr the irrelevance of that theory in real lif. | [20%] |
Question 2
Using the Neo-Keynesian Theory, producers are fxing the price of their goods above the
equilibrium.
2.1 Explain what the assumptions of the Neo-Keynesian Theory are, how the fxed prices
are affecting the supply and demand of goods and explain with a graphic how prices fxed
| above the equilibrium are leading to under-employment. | [30%] |
| 2.2 Discuss what tools & policies the government and Central Bank have to reduce under | |
| employment. Be detailed in your explanation. | [20%] |
Continued Overleaf
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Section B
You must answer ONE question from this section (Weighting noted against
each sub-question). The word limit per question is 750 words maximum. Anything
you write once you have reached the word limit will not be marked.
Question 3
Consider an economy that initially stays at its long-run equilibrium with output at Ye
and inflation at the target level of 1T. Policy affects the economy with a one-period lag.
Answer the fllowing questions:
3.1 Suppose households frm their expectations adaptively, use the 3-equation model and
diagrams to provide a period by period explanation of the adjustment process fr the case
| where the economy is hit by a permanent negative aggregate supply shock. | [20%] |
| 3.2 Draw the impulse response fnctions fr output, inflation, and the real interest rate | |
| after the shock. | [10%] |
3.3 How would the adjustment process differ fom the case of a temporary shock? What
| is the implication fr central bank when implementing monetary policy? | [10%] |
| 3.4 Now, suppose households frm their expectations rationally, will the impact of the | |
| shock of the question 3.1 on output be mitigated? Why? | [10%] |
Question 4
Consider an economy that initially stays at its long-run equilibrium with output at Ye
and inflation at the target level of 1T. The government’s budget is balanced and households
frm their expectations adaptively. Now, suppose the government anticipates a (transitory)
negative supply shock in the near fture and therefre decides to increase its current spending
via borrowing:
4.1 Use the 3-equation model and diagrams to provide a period by period explanation of
how the economy adjusts towards its new long-run equilibrium fr the cases of (a) the shock
| actually does not take place and (b) the shock actually takes place. | [20%] |
| 4.2 Draw diagrams of debt dynamics afer the policy and explain how this policy would impact the debt to GDP ratio, b, of the economy in the long run. Describe a policy that the |
|
| government can use to avoid an ever-rising/falling b if needed. | [10%] |
4.3 Will the inflation under the new equilibrium cause any concern fr the central bank?
| If yes, how could it respond? If no, why? | [10%] |
| 4.4 Is your answer to the question 4.1 the same if using the RE-PIH model instead of the | |
| 3-equation model? Explain. | [10%] |
End of paper
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