akfm - First Midterm Exam Spring 2005 Prof Andrew Atkeson...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
First Midterm Exam Spring 2005 (April 28, 2005) Prof. Andrew Atkeson Econ 106-F Student Name: ___________________________________________________________________ Instructions: You have 70 minutes to complete this exam. There are eight questions. Each question is worth 10 points. Write your answers in the space provided beneath each question. You should use scratch paper to figure out what you want to write and then put down you answer neatly and concisely. For the problems, if some calculation is involved, a typical answer should read something like “Solve this formula for X and then choose to invest in the project only if X>0” and write down the appropriate formula. For the essays, think of 3 or 4 appropriate sentences that express the key idea and write those down. Restrict yourself to writing something legible in the space provided. For example, in response to the question “Explain how the household saving rate can fall at the same time that the ratio of household net worth to income is rising.” You might write the following “Standard accounting measures of household savings do not include capital gains on assets as part of income. Thus, if asset prices rise rapidly, the ratio of household net worth to income can rise even if households save very little of the standard measure of their income” Something that short is perfectly adequate. You should spend the 6-7 minutes you have on the essay figuring out exactly what to say in the space provided.
Image of page 1

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

View Full Document Right Arrow Icon
Question 1: a) Mr. Free has $100 dollars income this year and zero income next year. The market interest rate is 10% per year. If Mr. Free consumes $20 this year, and invests the rest in the market, what will be his consumption next year? Consumption next year = ($100-$20) * 1.1 = $88 b) Ms. Newcastle has $60,000 income this year and $30,000 next year. The market interest rate is 10% per year. Suppose Ms. Newcastle consumes $70,000 this year. What will be her consumption next year?
Image of page 2
Image of page 3
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