Assignment 2

Assignment 2 - Econ 199 Macroeconomic Theory I Assignment 2...

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Econ 199 Macroeconomic Theory I Assignment 2 (Chapter 4,5 &6) Due: in TA’s tutorial, March 26th, 2009, Thursday 1. Label each of the following statement true, false, or uncertain. Explain briefly. a) Income and consumption are both examples of stock variables. b) The central bank can increase the supply of money by decreasing the reserve ratio. c) By construction, bond prices and interest rate always move in the same direction. d) The changes of the money supply will lead to a shift of the IS curve since it will affect the interest rate. e) If government spending and tax increase by the same amount, the IS curve does not shift. f) It is not possible for government policy to increase output without changing the interest rate. g) Bargaining power of workers only depend on the labor market condition and the nature of the job. h) The natural rate of unemployment is unaffected by policy changes. 2. Question 7 of Chapter 4 in the textbook. 3. Question 8 of Chapter 4 in the textbook.
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4. Suppose that the consumption function is given by ) ( 1 0 T Y C C C + = , the investment function is given by i b Y b b I 2 1 0 + = , and the goods market equilibrium is given by G I
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Assignment 2 - Econ 199 Macroeconomic Theory I Assignment 2...

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