Self-Assessment-Test for the Studies Program: Applied Economics and International Economic Policy

This test has been designed to allow you to assess your potential for studying efficiently and successfully. The questions asked have been considered to contain basic knowledge that your previous study programs should at least have covered. If you reach a score of 5.0 meaning that you failed at least half of all the questions and should consider freshening up on your basic economics skills before considering the study program "Applied Economics and International Economic Policy".

I. General Economic Knowledge and Economic History

Question 1:

Which is Say’s law?
a) If an equilibrium in n markets is achieved it can be achieved in n+1 markets as well
b) By arbitrage there exists only one price for every good in an open economy
c) Productivity can increase without investment through learning-by-doing
d) Every supply creates its demand
Result:


Question 2:

When did the Bretton-Woods-System end?
a) Beginning of the 1970s
b) End of World War II
c) Beginning of World War I
d) Beginning of 1990s
Result:


Question 3:

Which is the correct order of economists and their main contributions to economics?
a) A. Smith -> R. Solow -> J.M. Keynes -> M. Friedman
b) J.M. Keynes -> A. Smith -> R. Solow -> M. Friedman
c) A. Smith -> J.M. Keynes-> R. Solow -> M. Friedman
d) A. Smith -> R. Solow -> M. Friedman -> J.M. Keynes
Result:


II. Microeconomics

Question 4:

The demand curve shifts to the right and the marginal costs (k’) are positive. What happens to the equilibrium price and the equilibrium quantity?
a) They both increase
b) They both decrease
c) The price increases while the quantity decreases
d) The quantity increases while the price decreases
Result:


Question 5:

Assume a supply curve p = a + bq (p is the price, q is the quantity, a and b are positive parameters) and a demand curve p = e - fq: The equilibrium quanity then is given under competition by: q = (e – X1) / (X2 + X3) with:
X1 =
X2 =
X3 =
Result:


Question 6:

Define the price elasticity in a market.
a) By how many percentage does the demand / supply change when the price changes by 1 unit
b) By how many percentage does the demand / supply change when the price changes by 1 percent
c) By how many units does the demand / supply change when the price changes by 1 percent
d) By how many units does the demand / supply change when the price changes by 1 unit
Result:


Question 7:

Which of the following figures can be used to deduce the equilibrium solution in the case of a monopoly? (Assuming a linear cost function.)

a)
b)
c)

Result:


Question 8:

Assume the presence of two goods i and j. By which formula is the cross-price elasticity calculated? ηxi,pj = X1 • X2 / X3
a) X1 = ∂xi / ∂pj; X2 = pj; X3 = xi
b) X1 = ∂pi / ∂pj; X2 = pj; X3 = pi
c) X1 = ∂xi / ∂xj; X2 = pj; X3 = pi
d) X1 = ∂pi / ∂xj; X2 = pj; X3 = xi
Result:


Question 9:

Assume that there is perfect competition in goods markets and labor markets. Profit-maximizing firms will hire workers according to which condition?
a) W = P ∂Y / ∂L
b) W = P ∂Y / ∂K
c) L = P ∂Y / ∂L
d) L = W ∂Y / ∂L
Result:


Question 10:

Which comments on negative external effects are true?
1) External effects are caused outside the domestic economy.
2) With negative external effects one party is harmed by another without monetary compensation.
3) With negative external effects one party is harmed by another and compensated for its loses.
4) External effects always include two or more parties.
a) Only 1)
b) 2) and 4)
c) 3) and 4)
d) Only 4)
Result:


Question 11:

Which is an example to positive external effects?
a) Open source software
b) Air pollution
c) Overcrowded highways
d) Bank robbery
Result:


III. Macroeconomics

Question 12:

Which market's equilibriums are described by the IS-Curve?
a) Money Market
b) Labor Market
c) Goods Market
d) Stock Market
Result:


Question 13:

Consider a production function:
Y = KβL1-β (Y is output, K capital, L labor; 0<β<1)
Taking natural logarithms results in which equation?
a) lnY = βlnK+(1-β)lnL
b) lnY = βlnK / (1-β)lnL
c) lnY = βlnK-βlnL
d) lnY =(1+β)lnK+βlnL
Result:


Question 14:

What is the marginal product of capital?
a) The sum of the derivatives of the production function with respect to all variables except capital
b) The result from solving the production function for capital
c) The steady state return of the capital stock
d) The derivative of the production function with respect to capital
Result:


Question 15:

In a system of flexible exchange rates which of the following statements is always true?
1) The central bank has the option of monetary policy
2) The central bank does not have the option of monetary policy
3) The central bank has the option of fiscal policy
4) The central bank is independent
a) 1) and 4)
b) Only 3)
c) Only 1)
d) 2) and 4)
Result:


Question 16:

Explain the Keynesian “liquidity trap".
a) The central bank is continuously decreasing the money supply, therefore the LM-curve is sinking
b) Investment is independent of firms’ liquidity, therefore the IS-curve is vertical
c) It is expected that the interest rate does not decrease anymore, therefore the LM-curve is horizontal
d) IS- and LM-curve do not meet, therefore no Hicks-equilibrium exists
Result:


Question 17:

Which figure illustrates an expansionary monetary policy in a system of fixed exchange rates with infinite capital mobility?

a)
b)
c)

Result:


Question 18:

Is this policy effective?
a) Yes
b) No
c) In some cases
Result:


Question 19:

Explain the Philips curve.

a) Figure 1 shows the short run Philips curve. In the long run no Philips curve exists
b) Figure 2 shows the short run Philips curve and Figure 1 the long run Philips curve
c) Figure 1 shows the short run and the long run Philips curve
d) Figure 1 shows the short run Philips curve and Figure 2 the long run Philips curve
Result:


Question 20:

What is the Fisher equation / Quantity equation? (M for money, Y for output, P for price level, V for velocity)
* = *
Result:


Question 21:

Please give for the Fisher equation in growth rates the respective mathematical operators.
gM X1 gV = gP X2 gY
a) X1 = + and X2 = -
b) X1 = + and X2 = +
c) X1 = • and X2 = •
d) X1 = / and X2 = /
Result:

Question 22:

What does the total differential of an equation calculate?
a) The absolute change of the dependent variable, if one of the independent variable increases by one unit
b) The absolute change of the dependent variable, if all of the independent variables increase by one unit
c) The relative change of the dependent variable, if one of the independent variable increases by one unit
d) The relative change of the dependent variable, if one of the independent variable increases by one percentage point
Result:


IV. Mathematics

Question 23:

What is the derivative dY/ds using the equation:
sY-C0=-ar+G
a)
b)
c)
d)
Result:


Question 24:

Price Levels are in 2012 P2012=150 and in 2013 P2013=200. Calculate the inflation rate π.
a) π=0.75
b) π=-0.33
c) π=0.50
d) π=0.33
Result:


V. Statistics

Question 25:

Which test-statistic can be used to test for serial autocorrelation:
a) t-test
b) F-Test
c) Durbin-Watson
d) Akaike Criterion
Result:


Question 26:

The basic idea of an OLS estimator is:
a) Minimizing the R2
b) Minimizing the squared errors
c) Minimizing the χ2 statistic
d) Maximizing the R2
Result: