MT#2_practiceMT#2.pdf - Name UT ID Economics 320L Spring...

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1 Name: UT ID #: Economics 320L, Spring 2019 Midterm 2 Practice midterm #2 Please put all papers away. No calculators, no cell phones, no computers: nothing electronic is allowed. The midterm is scheduled for 75 minutes. There are 75 points total on the exam. Part 1: Definitions (2 points each) 1) Fisher Equation: 2) Laffer curve: 3) Okun’s Law : 4) Time inconsistency: 5) Golden Rule level of capital:
2 Part 2: Short Answers (20 pts total) I- List and define the three lags which can hamper the implementation of countercyclical policy. (3 points) II- Derive the relationship between short-term and long-term interest rates (for example, on a 1-year and 2-year bond). (3 points) III- What are the main differences between traditional and modern business cycle facts? (2 points)
3 IV- What are the income and substitution effects in labor supply? Explain intuitively. (3 points) V- Why is central bank independence important? (3 points) VI- What does it mean for an economy to be dynamically inefficient ? Explain intuitively. (3 points)
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