Test 3 Practice 3 - Answer Key - ECON 102: Practice 3 -...

ECON 102: Practice 3 - Test 3
Macroeconomic Theory
Please be BRIEF in answering the following questions. Use only the provided blue books.
Work alone and do not use any type of “external help”, other than a standard calculator. You
have 80 minutes to work on your test. Good luck!
1. (5 points) Recently Argentina nationalized the main oil firm in the country, YPF-Repsol,
after having been privatized 20 years ago. Why do you think this decision was highly
criticized? Use the idea of Time Consistency.
2. (5 points) Compare the volatility of consumption, investment, and output in the U.S. econ-
omy. Why is this comparison important when constructing macroeconomic models?
3. (5 points) Shocks to TFP are usually modeled as an AR(1) process. Explain how this process
looks like and what its parameters represent.