Midterm 2 answer key

Midterm 2 answer key - NAME (IN BLOCK LETTERS): _ Professor...

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NAME (IN BLOCK LETTERS): ___________________________________________________________ Econ 1110, Spring 2008, Midterm 2 Professor Ted Temzelides 1 Professor Ted Temzelides Second Midterm Examination April 1, 2008 ANSWER KEY READ THE FOLLOWING DIRECTIONS CAREFULLY. PLEASE DO NOT TURN THE PAGE UNTIL THE EXAM BEGINS. 1. This examination consists of 4 major questions. Altogether there are 7 pages (including this page). When the examination begins, please check to make sure that you have all pages. 2. PRINT your name LEGIBLY - IN BLOCK LETTERS - at the top of EVERY PAGE immediately after the exam begins. The exam pages will be separated after the exam ends, and it is important that your name be printed on every page. 3. Answer all questions concisely in the space provided. If you need additional space to answer a question, use the back of the page on which the question is typed, and indicate clearly on the front of the page that part of the answer is on the back of the page. 4. You do not need to explain your answer for QUESTION II of this exam (Multiple Choice). Just choose one of the options given. 5. For the rest of the exam, only short answers are required, but you must give at least a BRIEF EXPLANATION of your answers. NO CREDIT will be given without a brief explanation! 6. You are allowed TWO A4 “cheat sheets” for this exam. You may fill BOTH SIDES of these cheat sheets. 7. You may use a calculator, but you may NOT use a computer.
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NAME (IN BLOCK LETTERS): ___________________________________________________________ Econ 1110, Spring 2008, Midterm 2 Professor Ted Temzelides 2 QUESTION I: IS-LM (25 Points) Consider an economy with the following data: C = 1000 – T + 0.6Y - 200r I = 1000 - 300r G = 1000 T = 0.1Y L = 0.6Y -600(r+ π e ) Μ = 6000 π e = 0 5000 = Y a) (7 Points) Derive the IS curve. [Express it in the form r = f(Y) ] Solution: C+I+G=Y. Substituting and solving for r as a function of Y gives: r = 6 -0.001Y b) (7 Points) Derive the LM curve as a function of Y and M/P . [Express it in the form r = f(Y,M/P) ] Solution: Set M/P=L and solve for r as a function of Y. The solution is: r = 0.001Y -0.001666667M/P c) (11 Points) Derive the short run equilibrium output and real interest rate assuming
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This homework help was uploaded on 04/15/2008 for the course ECON 1110 taught by Professor Tedloch-temzelides during the Spring '08 term at Pittsburgh.

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Midterm 2 answer key - NAME (IN BLOCK LETTERS): _ Professor...

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