mt2-f2009 - Midterm #2 Questions Fall 2009 125 points, 80...

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Midterm #2 Questions Fall 2009 125 points, 80 minutes Question 1 (15 points total; 9 minutes total) a. (5 points) What determines the level of output in the long run? What determines the level of output in the short run? b. (5 points) What is the current value of the unemployment rate? What were the last two episodes in the U.S. when the unemployment rate was this high? c. (5 points) Why does real money demand increase when interest rates decrease? Question 2 (10 points; 6 minutes) Suppose the following equations describe the economy MPRF: u = 0.12 + 1.5( B - 0.02) PC: B = 0.02 - 2(u - 0.04) Solve for the equilibrium values of unemployment and inflation rates. If you can’t solve this without a calculator (tsk tsk), set it up and go as far as you can to get as much partial credit as possible. Question 3 (24 points total; 15 minutes total) California, like most states, is required to balance its budget each year: state spending plus transfer payments cannot exceed state tax revenues. As the economy moves into recession, tax revenues fall. a.
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This note was uploaded on 02/04/2011 for the course ECON 100B taught by Professor Wood during the Fall '08 term at University of California, Berkeley.

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mt2-f2009 - Midterm #2 Questions Fall 2009 125 points, 80...

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