Macroeconomic Policy and Performance
ECO2002
DEADLINE
Your answers must be submitted by 13:30 (UK time) on 21 May 2021. This is a strict deadline which must be adhered to.
The exam duration already includes a substantial amount of time for uploading your answers. You are strongly encouraged to begin uploading by 12:30 (UK time), in case you experience technical difficulties which may delay your submission. It will not be possible to accept any answers after the deadline.
UPLOADS
Your answers should be submitted via https://canvas.qub.ac.uk. You must show all of your working out. For handwritten answers there are several options:
i i) Scan the pages, or email yourself the photos, and insert them into a Word or PDF document on your computer, and then submit via Canvas; or

i ii) Download the Microsoft OneDrive app to your phone to take the photos and produce a combined PDF. You can upload this to Canvas directly via your OneDrive (https://community.canvaslms.com/docs/DOC-10560-4212675755); or

i iii) Submit individual photos using the Canvas app, or via your phone browser at https://canvas.qub.ac.uk

CONTACT DURING THE TEST
If you have queries during the test you can email me at [email protected]. If you have broadband issues and need to use the phone, you can contact 028 9097 4200.
STATEMENT OF INTEGRITY
By submitting the work, I declare that:
1. The submission is my own original work;
2. I did not use lecture notes or any other material, including online resources, at any stage during the examination;
3. I have read and understood the University regulations relating to academic offences, including collusion and plagiarism: http://www.qub.ac.uk/directorates/AcademicStudentAffairs/AcademicAffairs/GeneralRegulations/Procedures/ProceduresforDealingwithAcademicOffences/
4. I agree to complete an oral assessment if requested to do so.
ECO2002

Section A – use a Section A answer book
Answer at least ONE question 1 (a) GDP per capita in Luxemburg is roughly 2.5 times the EU 28 average. Ireland’s GDP is over 1.8 times the EU 28 average and Germany’s about 1.2. The GDP per capita of the UK, France and Italy are close to the EU average. What factors do we need to bear in mind in interpreting these statistics? (70 marks)

(b) Imagine that the government decides to increase unemployment benefits. How would this change both government expenditures and consumption? Explain your answer. (30 marks)

2 In the context of Solow model, contrast the effects of higher productivity and higher saving rate on output per worker. (100 marks)

3 (a) Assume that both government transfers and taxes increase in the same amount and simultaneously there is a rise in consumers’ confidence. Using the Keynesian Cross model, comment on the combined effect of all these disturbances on output. (50 marks)
(b) Using the IS-LM model, contrast the effect on output of an increase in taxes when the economy is and is not on the zero lower bound. (50 marks)
4 The OECD reported a drop in the average business confidence index in OECD countries in 2018. Using appropriate diagrams, answer the following questions.
(a) Would the drop in business confidence have different effects on output in the context of the IS-LM and AD-AS models in the short run? (60 marks)
(b) Would the drop in business confidence have different effects on output in the short run and long run? In answering this question, use the AD-AS model. (40 marks)
5 In 2003, the economists John T Addison and Paulino Teixeira surveyed the early empirical literature studying the effects of employment protection on employment (Addison, John T. and Paulino Teixeira, “The Economics of Employment Protection,” Journal of Labor Research, 2003, 24 (1), 85–128.). Most of the studies they surveyed pointed to a negative relation between employment protection and employment. And some studies pointed to a particularly negative relation between employment protection and youth employment. Discuss these results in light of the effects of employment protection on the job separation and job finding probabilities. (100 marks