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# answersexam2 - Name SID Discussion Section Economic 100B...

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Spring 2008 (Exam #2) Econ 100B 1 of 8 Name: ____________________________ SID : ____________________________ Discussion Section: ________________ Economic 100B Macroeconomic Analysis Professor Steven Wood Spring 2008 Exam #2 ANSWERS Please sign the following oath: The answers on this test are entirely my own work. I neither gave nor received any aid while taking this test. I will not discuss the questions on this test until after 5:00 p.m. on April 3, 2008. ______________________ Signature Any test turned in without a signature indicating that you have taken this oath will be assigned a grade of zero. Graph Instructions When drawing diagrams, the following rules apply: 1. Completely , clearly and accurately label all axes, lines, curves, and equilibrium points. 2. The original diagram and any equilibrium points MUST be drawn in black or pencil. 3. The first change in any variable, curve, or line and any new equilibrium points MUST be drawn in red. 4. The second change in any variable, curve, or line and any new equilibrium points MUST be drawn in blue. 5. The third change in any variable, curve, or line and any new equilibrium points MUST be drawn in green. Do NOT open this test until instructed to do so. Good Luck!

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Spring 2008 (Exam #2) Econ 100B 3 of 8 A. Multiple Choice Questions . Circle the letter corresponding to the best answer. (3 points each; total of 30 points.) 1. An increase in the real interest rate would cause an increase in the real demand for money: a. No matter what the change in expected inflation. b. If expected inflation fell by less than the rise in the real interest rate. c. If expected inflation fell by the same amount as the rise in the real interest rate. d. If expected inflation fell by more than the rise in the real interest rate. 2. Suppose that a new law imposes a tax on all trades of bonds and stocks. What is the likely effect on money demand? a. Money demand declines first, and then rises when inflation increases. b. Money demand rises. c. The overall effect is ambiguous. d. Money demand declines. 3. The IS curve would unambiguously shift to the right if there were: a. An increase in both government purchases and corporate taxes. b. An increase in both government purchases and the expected future marginal product of capital. c. An increase in the expected future marginal product of capital and a decrease in expected future output. d. A decrease in both corporate taxes and the expected future marginal product of capital. 4. Suppose that the Federal Reserve reduces the real interest rate to below 2%. This drastic action leads to fear and panic among households and businesses about what information the central bank might have about the economy. We could analyze this by: a. A rightward shift of the LM curve. b.

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answersexam2 - Name SID Discussion Section Economic 100B...

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