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Ps5_questions - 14.02 Principles of Macroeconomics Problem Set 5 Q uestions Posted on Thursday O due on Thursday O by 4:30 PM in E 52-391 You must

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14.02 Principles of Macroeconomics Problem Set # 5, Questions Posted on Thursday, October 24, 2002, due on Thursday, October 31, 2002, by 4:30 PM in E52-391. You must staple a copy of this frontpage on your problem set. Name: __________________________________________________ MIT ID: __________________________________________________ 10AM Samer Haj-Yehia 9AM Indradeep Ghosh 11AM Samer Haj-Yehia 11AM Oscar Landerretche 12AM Samer Haj-Yehia 1PM Indradeep Ghosh 1PM Samer Haj-Yehia 1PM Verónica Rappoport 2PM Samer Haj-Yehia 2PM Verónica Rappoport 3PM Verónica Rappoport (Table is for corrector use only) 1 2 3 4 5 6 Total I II III Total
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PART I – TRUE/ FALSE/ UNCERTAIN (4 points each) 1. Like expansionary monetary policy, expansionary fiscal policy returns output in the medium run to its natural level, and increases prices. Therefore, fiscal policy is also neutral. 2. If investment is completely insensitive to the interest rate (i.e. in the Investment function I = aY – bi, b is equal to zero), then the AD curve will be vertical. 3. A politician faced with a steeper AS curve is more likely to embark on a given disinflation program than one faced with a flatter AS curve (assume that the steeper slope is due to a higher sensitivity of nominal wages to the unemployment rate). 4. Money cannot be neutral in the short-run – the neutrality of money is exclusively a medium run phenomenon. PART II – IS/ LM and AS/ AD – A special case (10 points each)
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This note was uploaded on 11/29/2009 for the course 14 14.02 taught by Professor Geurrieri during the Fall '09 term at MIT.

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Ps5_questions - 14.02 Principles of Macroeconomics Problem Set 5 Q uestions Posted on Thursday O due on Thursday O by 4:30 PM in E 52-391 You must

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