MidtermExam_ECO2142C_Winter_2017E - ECO 2142 C...

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ECO 2142 C: MACROECONOMIC THEORY I Midterm exam I, Winter 2017 February 14, 2017. Duration: 80 minutes Dr. MAO TAKONGMO Charles Olivier Exercise 1 (20 points) Suppose that the money demand function takes the following form: ± M P ² d = L ( i,Y ) = Y 4 i a) If output grows by a rate of g, at what rate will the demand for real balances grow (assuming a constant nominal interest rate)? (10 points) b) What is the velocity of money in this economy? (10 points) Exercise 2 (40 points) Consider an economy described by the following production function: Y ( K,L ) = K 0 . 4 L 0 . 6 The depreciation rate is 10 percent. a) What is the per-worker production function?(10 points) b) Assume that the L is constant; nd the steady-state capital per worker, output per worker, and consumption per worker as a function of the saving rate and the depreciation rate.(10 points) c) What is the Golden Rule level of capital, k * gold ?(10 points) d) What is the Golden Rule level of consumption, c * gold ?(5 points) e) What is the corresponding saving rate , s * gold ?(5 points) Exercise 3 (40 points) Consider an economy that produces and consumes three di erent goods. The table below provides data for three

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