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Unformatted text preview: D ARTMOUTH C OLLEGE D EPARTMENT OF E CONOMICS E CONOMICS 22 P ROFESSOR A VNER B AR-I LAN M ACROECONOMICS S UMMER 2004 S ECOND M IDTERM E XAMINATION August 13, 2004 Instructions: 1. Please write your name on the following blank. Name: 2. The first part of the exam consists of 11 multiple choice questions worth 5 points each. Circle the best answer to each question. There is no penalty for guessing. 3. The second part consists of 3 problems worth 45 points. Write all answers on the exam in the space provided 4. The exam will last 60 minutes. Allocate your time appropriately. ! ! ! GOOD LUCK ! ! ! 1 PART 1 - MULTIPLE CHOICE QUESTIONS 1. A painting is currently worth $100,000, and is expected to maintain its real value for three years. The real interest rate is 10%. What is the present value of the paintings expected price at the end of the third year? a. $75,131 b. $88,899 c. $96,153 d. $100,000 e. $70,000 2. The life cycle and permanent income theories of consumption share which of the following features? a. Consumption spending depends on income, rather than wealth. b. Consumption spending should fluctuate widely from year to year. c. Consumers look ahead to the future in making current spending decisions. d. All of the above. e. None of the above. 3. According to the accelerator model, as the economy enters a recession and GDP declines, we should expect that the level of net investment a. becomes zero b. decreases but is still positive c. increases at a decreasing rate d. becomes negative e. increases due to undesired inventories 4. If the marginal product of capital is above the rental cost of capital, then a firm should a. have positive net investment to increase the capital stock...
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This note was uploaded on 04/25/2008 for the course ECON 022 taught by Professor Rotating during the Winter '07 term at Dartmouth.

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