Exam #2 Spring 2007 solutions

Exam#2 Spring 2007 - Name_ANSWERS SID Discussion Section Economic 100B Macroeconomic Analysis Professor Steven Wood Spring 2007 Exam#2 ANSWERS

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Spring 2007 (IS – LM Model) Econ 100B 1 of 10 Name: ________ ANSWERS __________ SID : ____________________________ Discussion Section: ________________ Economic 100B Macroeconomic Analysis Professor Steven Wood Spring 2007 Exam #2 ANSWERS Please sign the following oath: The answers on this test are entirely my own work. I neither gave nor received any aid while taking this test. I will not discuss the questions on this test until after 3:30 p.m. on March 22, 2007. ______________________ Signature Any test turned in without a signature indicating that you have taken this oath will be assigned a grade of zero. Graph Instructions When drawing diagrams, the following rules apply: a. Completely , clearly and accurately label all axis, lines, curves, and equilibrium points. b. The original diagram and equilibrium points MUST be drawn in black or pencil. c. The first shift of any curve(s) or line(s) and the new equilibrium points MUST be drawn in red. d. The second shift of any curve(s) or line(s) and new equilibrium points MUST be drawn in blue. e. The third shift of any curve(s) or line(s) and new equilibrium points MUST be drawn in green. Do NOT open this test until instructed to do so. Good Luck!
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Spring 2007 (IS – LM Model) Econ 100B 3 of 10 A. Multiple Choice Questions . Mark the letter corresponding to the best answer in the assigned space at the bottom of the page. (3 points each; total of 30 points.) 1. Research has shown that small firms are much more responsive to changes in the cost of credit than large firms because they have fewer internal funds. So, if a country as a higher proportion of small firms then: a. The LM curve would be steeper. b. The IS curve would be flatter. c. The IS curve would be steeper. d. The country would have a higher monetary base. e. None of the above. 2. According to Okun’s Law, what variable would tell us the most about the demand for labor in an economy? a. The level of the money supply. b. The level of production. c. The money multiplier. d. The marginal product of labor. e. The level of marginal tax rates. 3. Research has shown that people become more risk adverse during recessions which tends to reduce both investment and lending by banks. So, within the IS-LM framework, an increase in uncertainty would: a. Shift the IS curve inwards. b. Shift the LM curve inwards. c. Shift the LM curve outwards. d. a. and b. e. a. and c. 4. Suppose that when the German economy booms Germans like to consume more U.S.-made goods. Thus, if the German economy is at its NAIRU and the German money multiplier suddenly increases, then: a. The German IS curve shifts outwards.
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This test prep was uploaded on 04/01/2008 for the course ECON 100B taught by Professor Wood during the Spring '08 term at University of California, Berkeley.

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Exam#2 Spring 2007 - Name_ANSWERS SID Discussion Section Economic 100B Macroeconomic Analysis Professor Steven Wood Spring 2007 Exam#2 ANSWERS

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