Midterm 2 Fall 2007 with Solutions

Midterm 2 Fall 2007 with Solutions - Name Economics 200...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Name________________________________ Economics 200 Midterm Examination 2 Thursday, November 15, 2007 Write your name in the space provided at the top of this page. Turn in this page with your bluebook(s). Bluebooks not so accompanied will NOT be graded. Also write your name on your bluebook but do not begin writing in your bluebook until told to do so. You have one hour and 10 minutes to complete this exam. Each question carries the number of points indicated for a total of 70 points. Think of it as 1 point = 1 minute. NB: I prefer brief, precise, correct answers to long-winded, waffling responses that mistake quantity for quality. Good luck! ó. 1. Consider a closed economy with investment behavior described by where and MœD ] D 9 99 are positive parameters with measuring the sensitivity of investment to changes in GDP. The idea is that, for example, increases in GDP provide both the incentive and wherewithal (through increased profits) for increases in investment spending by firms. Assume that the remainder of the goods market is as specified in class viz.: IœGMK Gœ+,Ð]XÑ XœX >] KœK Iœ] E (spending balance) . Note that the first two pages of “The Algebra of Aggregate Demand” are attached to this exam. (a) (10 points) Find an expression for level of GDP giving goods market equilibrium in this economy and infer from that expression that the autonomous spending multiplier is in " ",Ð">Ñ 9 this economy. (b) (5 points) Compare the magnitude of the autonomous spending multiplier in this economy with that studied in class. Explain the economic (as distinct from the mathematical) reason for sign of the difference between the two multipliers. (c) (10 points) Compare the relative efficacy (in influencing the quantity of aggregate demand) of monetary and fiscal policy in this economy with that studied in class – that is with an economy having . You may assume that the money market is exactly as specified in MœD.< class.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2. (10 points) Several recent studies of developing countries have found that those countries who offer women equal access to education have, , higher per capita incomes than ceteris paribus those who do not. One reason for this is that better educated women tend to have lower fertility rates. Use the Solow growth model to analyze the effects of lower fertility rates on the level and growth rates of per capita incomes. Be sure to illustrate you answer with the a diagram and to explain the economics of the matter.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 8

Midterm 2 Fall 2007 with Solutions - Name Economics 200...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online