midterm-A - Econ 101b - Answer Key to the Midterm Exam...

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Econ 101b - Answer Key to the Midterm Exam Jean-Philippe Stijns - 11/12/99 Definitions and Concepts 1. Golden Rule savings rate The savings rate at which consumption per capita is maximized along the steady-state growth path. This saving rate is equal to the share of capital in national income with a Cobb-Douglas production function. 2. Mathusian Trap A situation where a country experiences a high population growth rate and thus very slowly growing income per capita in spite of technological progress. A country escapes the mathusian trap when technological progress accelerates and finally, demographic transition is achieved. 3. Steady State capital-output ratio The amount of capital per unit of output along the steady-state growth path. Along the steady-growth path the capital-output ratio is constant; the steady-state capital-output ratio is equal to s/(n+g+delta). 4. Net exports The net amount of goods and services sold by American citizens and corporations to foreign customers. Net exports is the difference between gross exports and imports. 5. Permanent / Life-cycle income The amount of income consummers expect to receive on average over their (remaining) lifetime. It is this income that determines consumption at a deep level.
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6. Real interest rate The nominal interest rate corrected for the rate of inflation. The real interest rate tells a borrower how costly in terms of future purchasing power borrowing is; and tells a lender how profitable in terms of future purchasing power lending is. 7. Federal Reserve The Federal Reserve, the central bank of the United States, was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Today the Federal Reserve’s duties fall into four general areas: (1) conducting the nation’s monetary policy; (2) supervising and regulating banking institutions and protecting the credit rights of consumers; (3) maintaining the stability of the financial system; and (4) providing certain financial services to the U.S. government, the public, financial institutions, and foreign official institutions. (See http://www.federalreserve.gov/) 8. Quantity theory of money [...] the level of prices varies directly with the quantity of money in circulation, provided the velocity of
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This note was uploaded on 12/14/2009 for the course CHEM CHEM 140B taught by Professor Burkhart during the Spring '08 term at UCSD.

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midterm-A - Econ 101b - Answer Key to the Midterm Exam...

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