M&B midterm 2 answers - Econ 520 F11 Answer Key to S11...

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Econ 520 F11 Answer Key to S11 Second Midterm 1 a 2 e 3 e 4 b 5 a 6 e 7 c 8 d 9 c 10 a 11 c (hard see notes on multiplier) 12 a 13 e 14 b (hard see notes on multiplier) 15 d 16 b 17 e 18 d 19 d 20 b 21 b (hard, but shouldn’t be ! Bond purchases drive prices up and yields down) 22 b 23 a 24 e (hard) 25 c (hardish) 26 d (hard) 27 c 28 c 29 c 30 d 31 c 32 b 33 d 34 c 35 e (Super hard, but just requires a little reasoning and algebra: In a steady state, inflation must be fully anticipated, and ygap must be 0, so the nominal rate i is r 0 + by the Fisher Equation, and also is 1.0 + 1.5 + 0.5 (0) by the Taylor Rule. If r 0 is 4% as given, then solving for gives 6%. The same formula was tabulated in the readings and

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