Fall 05 Exam 3 Ans - Name: _ANSWERS_ (Last name, first...

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Fall 2005 (IS-LM-BP and DAD-SAS Models) 1 Name: _____ ANSWERS ______ (Last name, first name) SID: ____________________ Lecture (1 or 2): ____________________ UGBA 101B Macroeconomic Analysis for Business Decisions Professor Steven Wood Fall 2005 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 11:00 a.m. on December 20, 2005. ______________________ 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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Fall 2005 (IS-LM-BP and DAD-SAS Models) 2 A. Multiple Choice Questions . Circle the letter corresponding to the best answer. (30 points.) 1. Suppose that the government increases expenditure and prints money to finance it. However, this makes foreigners nervous about investing in the country. We could analyze the effects of these events by: a. A shift out of the IS curve. b. A shift out of the LM curve c. A shift in of the BP curve d. Both b. and c. e. a. and b. and c. 2. Suppose there is a sudden and permanent rise in foreign demand for American goods. Then: a. The IS curve shifts out. b. The BP curve shifts in. c. The BP curve shifts out. d. Both a. and b. e. Both a. and c. 3. In the Fleming-Mundell model with flexible exchange rates, expansionary fiscal policy is ineffective because: a. Interest rates rise which leads to a fall in net exports. b. Of sterilization. c. The central bank has to contract the money supply. d. Of an immediate exchange rate depreciation. 4. Suppose a country has a large persistent balance of payments surplus. Then all of the following are true EXCEPT: a. Foreign exchange reserves are rising over time. b. The central bank is reducing the value of the domestic currency. c. The country has a capital account surplus. d. Without sterilization, the money supply is rising over time.
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Fall 2005 (IS-LM-BP and DAD-SAS Models) 3 5. According to real business cycle theory, prices are completely flexible. Then a large fiscal expansion in year one would: a. Have no effect on inflation. b. Not shift the DAD curve. c. Have no effect on output.
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Fall 05 Exam 3 Ans - Name: _ANSWERS_ (Last name, first...

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