ECON 325 – Intermediate Macroeconomic Analysis Sample Questions – Midterm 2Fall 2009 Prof. Boragan Aruoba Note that most of these questions are from ECON 305which did not require any math.Multiple-Choice Questions 1.Consider an increase in the real interest rate in the context of the two-period model we studied and think about what happens to consumption today and tomorrow for a lender and a borrower. Choose the correct outcome: Lender Borrower Consumption Today Consumption Tomorrow Consumption Today Consumption Tomorrow (a) Increases Increases Increases Increases (b) Increases Ambiguous Ambiguous Increases (c) Ambiguous Increases Decreases Ambiguous (d) Ambiguous Ambiguous Increases Decreases (e) Decreases Ambiguous Decreases Decreases 2.An increase in the present value of taxes for the consumer implies (a) An increase in consumption and an increase in current labor supply. (b) No change in consumption and a decrease in current labor supply. (c) A decrease in consumption and an increase in current labor supply. (d) An increase in consumption and no change in current labor supply. (e) A decrease in consumption and a decrease in current labor supply.
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