test3pract - TEST 3 (Practice) Macroeconomic Theory Please...

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Macroeconomic Theory Please answer the following questions. Be BRIEF and only write on the space provided. No type of ±external help². You have 80 minutes to work on your test. NAME: 1. (1 point) What has happened with the world distribution of income over the last decades? Inequality has been reduced even if it has grown at a country level: reductions in inequality across countries has been stronger than increases in inequality within countries. 2. (1 point) What are the two basic characteristics of an idea? Ideas are nonrivalrous goods. Ideas are, at least partially, excludable . 3. (1 point) Is education a public good? Discuss. Most likely, no. It is rivalrous (your place at Penn is precluding someone else from being a student here) and excludable (I can prevent someone from education at a relatively low cost). 4. (1 point) In the endogenous growth model discussed in class, why do researchers spend time is a perfect competition in the market for ideas and the technology is constant returns to scale. 5. (1 point) Compare the volatility of consumption, investment, and output in the U.S. econ- omy. Why is this comparison important? Consumption is smoother than output (around 25 less volatile). Investment is much more volatile (around 3 times). This observation is important because any successful model of the business cycle must generate smoother consumption and more volatile investment. 1
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test3pract - TEST 3 (Practice) Macroeconomic Theory Please...

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