Sumemr 06 Exam 2 Ans

Sumemr 06 Exam 2 Ans - Name: _ANSWERS_ (Last name, first...

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Summer 2006 (IS-LM Model) 1 Name: ____ ANSWERS ______ (Last name, first name) SID: ____________________ UGBA 101B Macroeconomic Analysis for Business Decisions Professor Steven Wood Summer 2006 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 June 20, 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. c. The first shift of any line(s) and the new equilibrium points MUST be drawn in red. d. Any subsequent shifts in curves and new equilibrium points MUST be drawn in another color, first blue and then green. Do NOT open this test until instructed to do so.
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Summer 2006 (IS-LM Model) 2 A. Multiple Choice Questions . Circle the letter corresponding to the best answer. (3 points each; total of 30 points.) 1. Suppose the NAIRU falls significantly due to new labor market reforms. Then a good economic policy would be to: a. Reduce the monetary base. b. Increase the monetary base. c. Reduce the money multiplier. d. A permanent tax increase. e. Reduce government expenditures. 2. Given what you know about the concept of crowding out, “crowding in” could be: a. An increase in the reserve requirement for banks. b. Banks holding more excess reserves, reducing the money multiplier. c. An increase in investment when the government reduces expenditure. d. A decrease in consumption when the government increases expenditure. e. A rise in the velocity of money. 3. Suppose the government engages in a contractionary fiscal policy but the FED engages in a stabilization policy so as to keep output fixed. After this policy mix, all of the following are now true EXCEPT: a. Interest rates are lower. b. Investment is higher. c. Consumption is higher. d. Unemployment does not change. e. The money multiplier is lower. 4. Suppose that the FED aims to keep inflation at a fixed level. If inflation is forecast to decline in six months time, then the FED should: a. Increase interest rates in six months time. b. Increase interest rates today. c. Increase the monetary base today. d. Reduce interest rates in six months time. e. Reduce the money multiplier today.
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Summer 2006 (IS-LM Model) 3 5. Many economic commentators are predicting a large fall in house prices in the near future. If this happens, then, according to the credit channel view of monetary policy: a. Banks will lend less and cause an economic contraction.
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Sumemr 06 Exam 2 Ans - Name: _ANSWERS_ (Last name, first...

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