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Unformatted text preview: ECO320L-Macroeconomic Theory Midterm 2 Total 105 points NAME: ............................................................. Some Remarks: 1. Books and notes should be closed. 2. You can use a calculator. Exchange of calculator is not allowed. 3. Do not forget to label axes when you draw a graph. Good Luck! Total Exam Grade: (........./105pts) Multiple Choice Questions (........./56pts) (4pts each) 1. Which of the following leads to inefficiency of competitive equilibrium (i) Monopoly power (ii) Distortionary taxes (iii) Price controls by the government (a) (i) (b) (i) and (ii) (c) (i) and (iii) (d) (i), (ii), and (iii) 2. The Ricardian equivalence theorem implies that a government debt policy must be handled correctly for the economy to prosper. b the amounts of government spending are neutral. c an increase in government spending has no effect on the economy, as long as there is an equal change in taxes. d the timing of taxes collected by the government is neutral. 3. The government wants to reduce current account deficit by increasing current taxes and reducing current government deficit. This policy would be succesful if a there are international capital inflows and outflows. b there are constraints on the level of government spending. c there are constraints on consumers borrowing. d there are constraints on the level of government taxation. 4. An externality is any activity for which an individual firm or consumer does not take into account all (a) of the ramifications of its actions on others. (b) associated costs. (c) associated benefits. (d) associated costs and benefits. 5. Intertemporal decisions involve economic decisions (a) made within a given period of time. (b) made in between two periods of time....
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- Fall '08