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Unformatted text preview: Econ 100B Instructor: Yi Sun UCSC Summer 2007 Answer Key for Sample Midterm Part A (20%) Multiple choice questions: Pick up your best choice for the questions Answer: C A D D D C C D B E Part B (40%) Working with Equations B1) Consider the goods and the money market of an economy ( ) ( ) 600 6000 3 200 200 1000 4 1 100 4 1 250 = = = = + = + = s d d P M i Y P M T G i Y I Y C a) Derive the IS relation. ( points) b) Derive the LM relation. ( points) c) Calculate the equilibrium real income and the interest rate in this economy. ( points) d) solve for the equilibrium values of C and I, and verify the value you obtained for Y by adding up C, I and G ( points) e) What is the multiplier for government expenditure in this economy? (points) f) Now assume that the central bank increases the real money supply to 1200. What is the change in the real income and the interest rate under this policy? ( ) ( ) 5%. by decrease rate interest 100, by increase income real % 15 15 . : 700 : 200 2 1 1000 6000 3 00 2 1 to change ; 2000 1000 : same the is ) ) multiplier new get the we IS, into LM substitute when : ( 1 ) 200 50 350 600 : 200 50 1000 4 1 100 350 )...
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This homework help was uploaded on 04/07/2008 for the course ECON 100B taught by Professor Yisun during the Summer '07 term at UCSC.
- Summer '07