Spring2010MT1solutions - Name Banner Economics 304 Spring...

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1Name: Banner #: Economics 304, Spring 2010 Midterm 1 Please put all papers away. No calculators, no cell phones, no computers: nothing electronic is allowed. The exam is scheduled for 80 minutes. There are 90 points total on the exam, plus 3 extra credit points. Part 1: Definitions (3 points each)
2Part 2: Short but important Questions (5 points each) 1) What is the Permanent Income Hypothesis? Describe three pieces of evidence that Milton Friedman argued were consistent with the PIH but inconsistent with traditional Keynesian consumption functions.
2) Explain why an individual’s labor supply curve might be backward-bending.

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