midterm2tthanswersspring2008

midterm2tthanswersspring2008 - Economics 302 Spring 2008...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 302 Name _______________________________ Spring 2008 Answers to Second Midterm TTH Student ID Number ____________________ April 15, 2008 Section Number _______________________ This 75 point midterm consists of three parts: a short response section with 5 short response questions worth 5 points each for a total of 25 points; a problem section with two problems worth 15 points each for a total of 30 points; and an essay section worth a total of 20 points. You will want to write legibly since illegible answers will be graded as wrong answers. You will want to present your work in an orderly fashion since a lack of organization will be interpreted as a lack of mental clarity and competent expression. You will want to make sure your answers are clear and easy to find on the test. All work should be done on the exam booklet and all answers should provide work and any formulas that are used. A lack of work for any answer may be penalized by a lower grade on that section. Calculators are fine to use. If there is an error on the exam or you do not understand something, make a note on your exam booklet and the issue will be addressed AFTER the examination is complete. No questions regarding the exam can be addressed while the exam is being administered. SCORE: Short Response 25 points (5 points each) 1. __________________ 2. __________________ 3. __________________ 4. __________________ 5. __________________ Problems 30 points (15 points each) 1. __________________ 2. __________________ Essay 20 points __________________ TOTAL 75 points __________________ 1
Background image of page 1

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

View Full DocumentRight Arrow Icon
(Left Blank for scratch paper) 2
Background image of page 2
I. Short Response (worth 5 points each and 25 total points) For each of the following statements write a brief answer. Make sure your answers are well organized, neatly written, and explicit. Do not exceed the space provided under the question: these are short responses. 1. (5 points) The population growth rate in the US is currently approximately 2% per year. Assume that this rises to 4% per year due to decreased border security and higher birth rates. Write out the condition which defines the Golden Rule level of capital per effective worker. If the rate of technological change in the US economy and the capital depreciation rate are constant, what will happen to the level of capital per effective worker after this change in the population growth rate if the social planner wishes to keep the economy at k* gold ? The Golden Rule level of capital per effective worker is defined by MPK = n + δ + g . If n increases and both δ and g are constant, then MPK must also rise, which happens when k* gold falls. Thus, the level of capital per effective worker must fall after n rises so that the economy can begin transitioning to the new k* gold . (5 points) 2. (5 points) For this question use a Solow Growth Model with no technological change and no population change. An economy is initially in steady state at a level of capital per worker below the Golden Rule level of capital per worker. What must a social planner do to the savings rate to reach k*
Background image of page 3

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

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 10

midterm2tthanswersspring2008 - Economics 302 Spring 2008...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online