is2010 m_2 a - Dr. Valerie R. Bencivenga Economics 304L...

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Dr. Valerie R. Bencivenga Economics 304L Spring 2010 MIDTERM EXAM #2 Multiple choice 1. A 2. D 3. C 4. D 5. A 6. B 7. A 8. D 9. D 10. A 11. C 12. B 13. C 14. A 15. D 16. C 17. D 18. D 19. D 20. A 21. C 22. D 23. C 24. B 25. A Problems 1.a. autonomous expenditure = 200 – .75(100) + 900 + 600 + 375 b . slope = [.75(1 – .1) – .075] = .6 c. AE = 200 – .75(100) + 900 + 600 + 375 + [.75(1 – .1) – .075] Y AE = 2000 + .6Y d. AE = Y Y = 2000 6 . 1 1 = 5000 e. Y = 2.5 I Y = 250 f. expenditure multiplier = 5 . 2 .6 1 1 g. ∆C = .75(1 – .1)∆Y = .75(.9)(250) = 168.75 ∆YD = ∆Y – ∆T = 250 – 25 = 225 T = .1 Y = .1(250) = 25 ∆S pr = ∆YD – ∆C = 225 – 168.75 = 56.25 ∆S gov = ∆T = 25 (since ∆G = 0) ∆S = ∆S pr + ∆S gov = 11.25 + 25 = 36.25 ∆EX – ∆IM = 0 – .075 ∆Y = – .075(250) = – 18.85 h. Y = 2.5 autonomous expenditure Now autonomous expenditure = I + b∆T 0 We want ∆Y = 0, so autonomous expenditure = 0 => I + .75∆T 0 = 0 Therefore, .75∆T 0 = – 100 since I = 100, and ∆T 0 = – 100/.75 or ∆T 0 = – 133.33
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2 2. a, b, c. What is expected
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is2010 m_2 a - Dr. Valerie R. Bencivenga Economics 304L...

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