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Midterm1F09 - Midterm 1 Econ 381 Prof Evans Testing Center...

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Midterm 1 Econ 381, Prof. Evans Testing Center: October 7–9, 2009 INSTRUCTIONS: Write your name and section in the upper left-hand corner of this test. Please read each question below carefully, and respond to the questions on a separate sheet of scratch paper. You must show your work. When finished with the test, staple your scratch paper with your answers and your work to this test when you turn it in. You may use a testing center issued calculator. This midterm consists of the following two sections that total 100 points possible: Part 1: Short answer, 40 points possible Part 2: Analytical problems, 60 points possible Good luck. Part 1: Short answer (40 points possible, 2 points each) 1. Define macroeconomics. 2. What are the three requirements for a good macroeconomic model? 3. If the national debt is a stock, what is the corresponding flow? 4. True or False. The production function Y = K α + L 1 - α exhibits constant returns to scale. 5. Glenn Beck predicted in early 2009 that the increase in the money supply M in the United States would lead to widespread inflation P . Using the quantity theory of money, what are two potential reasons why Mr. Beck might be wrong? 6. What is the approximate correlation between GDP and prices over time ρ ( Y, P ) and how does it illustrate the classical dichotomy? 7. Assume that the nominal exchange rate of euros per dollar is 0.70 e /$ and that purchasing power parity holds. If a Big Mac costs $3.50 in the United States, how much should it cost in Europe? 8. Does our unemployment rate data come from the Establishment Survey or does it come from the Household Survey? 9. If you hold U 5,000 (yen) in a safe deposit box, are you a borrower or a lender to Japan?
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