Fall2018_MT1.pdf - Name Economics 320L Fall 2018 Midterm 1...

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1 Name: Economics 320L, Fall 2018 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 80 points total on the exam. WRITE NEATLY . Part 1: Definitions (2 points each) 1) Ricardian Equivalence: 2) Tobin’s Q 3) Random Walk Hypothesis: 4) Money Multiplier: 5) Intensive margin of labor supply: :
2 Part 2: Long Question on AS-AD Model (20 points total) Show what our AS-AD model predicts will happen to the variables in the table below in both the short-run (SR) and long-run (LR) in response to a decrease in Consumer Sentiment ( CS ). Show all of your work . No points will be awarded for unjustified answers. Use back of page if necessary. graphs should be fully labeled. P Y r C I SR LR All W/P N
3 Part 3: Consumption Theory/Endowment Economies (20 points total) There are two types of agents in the economy: A and B agents. Both types of agents have β =1 and preferences given by MU(c)=1/c. Agents differ in their incomes: A agents have 0 income in the first

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