Exam #3 Fall 2006 solutions

Exam #3 Fall 2006 solutions - Name_ANSWERS SID Discussion...

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Fall 2006 (IS - LM - BP and DAD - SAS Models) Econ 100B 1 of 10 Name: _________ ANSWERS __________ SID : ____________________________ Discussion Section: ________________ Economic 100B Macroeconomic Analysis Professor Steven Wood Fall 2006 Exam #3 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 December 19, 2006. ______________________ 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 line(s) and the new equilibrium points MUST be drawn in red. d. The second shift of any line(s) and new equilibrium points MUST be drawn in blue e. The third shift of any 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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Fall 2006 (IS - LM - BP and DAD - SAS Models) Econ 100B 3 of 10 A. Multiple Choice Questions . Mark the letter corresponding to the best answer in the corresponding space at the bottom of the page. (3 points each; total of 30 points.) 1. Suppose the balance of payments is 20 and the current account is 10. Then, all of the following are true EXCEPT : a. The central bank has accumulated foreign reserves of 20. b. The capital account is 10. c. Foreign residents have invested 10 in the country. d. The exchange rate is flexible. e. We do not know whether sterilization has occurred. 2. Suppose that the central bank adopts an inflation target , i.e., commits to keeping inflation at a fixed rate and doing whatever is necessary to prevent deviations from it. If inflation suddenly falls below the central bank’s target value, and exchange rates are flexible, then the best stabilization policy (and explanation) is: a. Expansionary fiscal policy since net exports will increase too. b. Expansionary monetary policy since net exports will increase too. c. Contractionary fiscal policy since net exports will fall too. d. Contractionary monetary policy since net exports will fall too. e. None of the above. 3. With fixed exchange rates, all of the following are true EXCEPT : a. The money supply is an endogenous variable. b. The central bank cannot use interest rates to stabilize the economy. c. The central bank will accumulate reserves when the currency wants to weaken. d.
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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 Berkeley.

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Exam #3 Fall 2006 solutions - Name_ANSWERS SID Discussion...

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