Fall 08 Exam 2 Ans

# Fall 08 Exam 2 Ans - Name SID Discussion Section GSI...

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Fall 2008 (Exam #2) Econ 100B Page 1 of 8 Name: ___________________________ SID: _____________________________ Discussion Section: _________________ GSI: _____________________________ Economic 100B Macroeconomic Analysis Professor Steven Wood Fall 2008 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 5:00 p.m. on November 6, 2008. __________________________________ 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: 1. Completely , clearly and accurately label all axes, lines, curves, and equilibrium points. 2. The original diagram and any equilibrium points MUST be drawn in black or pencil. 3. The first change in any variable, curve, or line and any new equilibrium points MUST be drawn in red. 4. The second change in any variable, curve, or line and any new equilibrium points MUST be drawn in blue. 5. The third change in any variable, curve, or line and any 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 2008 (Exam #2) Econ 100B Page 3 of 8 A. Multiple Choice Questions . Circle the letter corresponding to the best answer. (3 points each; total of 30 points.) 1. Suppose that the government increases its purchases and finances them by printing money. A complete description of this within the IS – LM model framework would be: a. A rightward shift of the IS curve. b. A rightward shift of the LM curve. c. A rightward shift of the IS curve and a rightward shift of the LM curve. d. A rightward shift of the IS curve and a leftward shift of the LM curve. 2. The following combination leads to the LOWEST real interest rate: a. Expansionary fiscal policy and expansionary monetary policy. b. Expansionary fiscal policy and contractionary monetary policy. c. Contractionary fiscal policy and expansionary monetary policy. d. Contractionary fiscal policy and contractionary monetary policy. 3. Suppose the government enacts a contractionary fiscal policy while the central bank simultaneously undertakes a stabilization policy so as to keep output fixed. After both of these policy changes, all of the following would be true EXCEPT: a. Investment is now higher. b. The money supply is higher. c. Consumption did not change. d. Unemployment did not change. 4. Our standard assumption is that desired investment only depends negatively on the real interest rate. Now suppose that desired investment still depends negatively on the real interest rate but now also depends positively on economic output. Then, compared to our standard assumption: a. The LM curve is now flatter.

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Fall 08 Exam 2 Ans - Name SID Discussion Section GSI...

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