AKforSecondMid

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

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

View Full Document Right Arrow Icon
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
Image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    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.

    Student Picture

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

  • Left Quote Icon

    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.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    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.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern