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mid2 - Introductory Macroeconomics(ECO 181B Mid 2 Spring...

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Introductory Macroeconomics (ECO 181B) Mid 2, Spring 2005 Course Instructor: Dr. Chetan Subramanian Duration: 50 minutes Version: 1 Note: Make sure that there are 27 questions in this test. Look carefully at the answer –choice (A,B,C,D or E) before you mark the correct choice in the answer-sheet. Your answer-paper might not be graded if you fail to abide by the instructions given below. Instructions: You are to answer in the answer-sheet provided, by darkening the circle you think appropriate, in pencil. On Page 1 of the answer sheet, o Write your name beside “NAME”. o Write the version number of your test. On Page 2 of the answer sheet, o Write your name and darken the appropriate circles under “NAME”. o Write your eight-digit Person Number (as given in your Student Identification Card), and darken the appropriate circles under “IDENTIFICATION NUMBER”. o Darken the number showing the Version Number of your test under “GRADE OR EDUCATION”. If you use erasers, be sure that the answer sheet is clean. Page 1
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Name: __________________________ Date: _____________ 1. In Macroland, currency held by the public is 2,000 econs, bank reserves are 300 econs, and the desired reserve/deposit ratio is 10 percent. If the Central Bank raises the required reserve/deposit ratio making the new desired ratio equal to 15 percent, then the money supply in Macroland will _____ to _____ econs, assuming that the public does not wish to change the amount of currency it holds. A) increase; 4,000 B) increase; 5,000 C) decrease; 4,000 D) decrease; 5,000 E) decrease; 2,300 2. If planned aggregate expenditure (PAE) in an economy equals 2,000 + .8Y and potential output (Y*) equals 11,000, then this economy has: 3. In the short-run Keynesian model where the marginal propensity to consume is 0.5, to offset an expansionary gap resulting from a $1 billion increase in autonomous consumption, taxes must be:
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