MIT14_02S14_Exam1_F11 - 14.02 Principles of Macroeconomics...

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Page 1 of 10 14.02 Principles of Macroeconomics Fall 2011 Quiz # 1 Thursday, October 6 7:30 PM 9 PM Please write your answers directly on the quiz. The exam has a total of 7 questions (100 pts) and a bonus question (5pts). Please answer all of them. You should read all of the questions first and plan your time allocation. NAME: MIT ID NUMBER: FRIDAY RECITATION EMAIL: (Table is for corrector use only) Question 1 2 3 4 5 6 7 Total Score
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Page 2 of 10 1. Define the following concepts in at most two sentences, showing that you have understood them, not just memorized definitions. (2 pts each) Unemployed Person: Consumption Basket: Discouraged Worker: Disinflation: GDP: Potential (natural) GDP: Base Money: Contractionary Policy: Investment: Equilibrium:
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Page 3 of 10 2. Explain why chain weighting is a preferable way of constructing macroeconomic time series. What problem does chain weighting help address? (5 pts) 3. The US economy is currently operating below potential there is a recessionary gap. Explain how, in the absence of government intervention, such a gap would close. Under what conditions, if any, would having a positive level of average inflation help? (5pts) 4. The US Federal Reserve recently announced that it will change the composition of its balance sheet by selling short-term bonds and buying long-term ones. (You may have heard of this referred to as “operation twist”.) What is this expected to do to long
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