. Explain the terminologies• State of technology• Balanced growth• Real interest rate•

Practice ExamDue date: 05-14-2016, Midnight.1. Explain the terminologies• State of technology• Balanced growth• Real interest rate• Yield curve• Nonhuman wealth2. Show the formula of the real stock price. And explain what ismeant by the fundamental value of a share of stock.3.When interpreting bond prices as present values, discuss what factors determine the price of a two-year discount bond. Include in youranswer an explanation of how changes in each of these factors affectsthe price of a two-year discount bond.4. Derive the steady state capital per effective worker and outputper effective worker given the production functionY = F (K, AN )where the saving rate is s, the depreciation rate is , the growth rateof technology is gA and the growth rate of population is gN .Now, the production function is Y = K 0.5 (5N )0.5 , the saving rate is 0.6,the depreciation rate is 0.7, the growth rate of technology is 3% andthe growth rate of population is 1.5%. What is the steady state capitalper effective worker level and output per effective worker level?5. Derive the IS-LM model by considering the expectation into themodel. You need to explain which factors affect each of the curve, andhow the changes of these factors will shift the corresponding curve ofthe model.1Suppose there is a expansionary monetary policy, with the assumptions that it will not change expectations of either the future interestrate or future output, how will this affect the equilibrium of IS-LMmodel?6. Explain with the labor market model the reason why the empiricalevidence shows that there is no high productivity growth coming withlow unemployment in historical data?2