AKforSecondMid

# AKforSecondMid - Midterm Exam#2 Econ 102 Winter 2008 Andrew...

This preview shows pages 1–2. Sign up to view the full content.

Midterm Exam #2 Econ 102, Winter 2008 Andrew Hollenhorst Problem A1 FALSE. According to the quantity theory of money MV = PY assuming that M and Y are unchanged, if V decreases then P must decrease. Problem A2 FALSE. Consider the Keynesian cross. Recall E = MPC ° ( Y ± T ) + I ( r ) + G A smaller MPC thus implies a °atter E curve. For a given increase in the interest rate, and thus a given vertical shift up, a °atter E curve produces a smaller change in GDP. This produces a steeper IS curve. Problem A3 TRUE. When money demand is insensitive to changes in interest rates it is relatively steep. When income increases the demand curve shifts right by a ±xed amount and interest rates rise by a large amount compared to a relatively °at money demand curve. This produces a steep curve. Problem B1 The expression is given by U t +1 = sE t + (1 ± f ) U t U t +1 = s ( L t ± U t ) + (1 ± f ) U t where the ±rst term represents the number of employed workers who separate from their jobs and the second term the number of workers who don²t ±nd a job. To go from the ±rst equation to the second we use the identitiy L t = U t + E t . Notice the new worker nL t

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern