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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:

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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)

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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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