econ205Midterm1Section26062Fall2007 - ECONOMICS 205...

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ECONOMICS 205: PRINCIPLES OF MACROECONOMICS FALL 2007 MARK MOORE MIDTERM EXAM 1 (T-TH Section: 26062) The exam has 70 points available. You have 75 minutes to complete it. Write your answers in ink in a bluebook. Write your name, student ID, and discussion section (TA and time) on the bluebook. BE SURE TO EXPLAIN YOUR ANSWERS. Consumption, Housing Wealth, and Macroeconomic Equilibrium 1. (9 Points) a. Draw the graph of aggregate consumption versus disposable income. b. What does the slope of this curve represent? c. What can you say about the value of the slope? 2. (9 Points) Now consider the recent problems in the U.S. housing market. As one aspect of this issue, think about the fact that the value of a family’s home is one component of a family’s wealth. a. If housing prices fall (or even rise more slowly than expected), what happens to the wealth of households in the economy? Therefore, what will likely happen to aggregate consumption? b.
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econ205Midterm1Section26062Fall2007 - ECONOMICS 205...

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