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ECON 100B - Spring 2007 - Wood - Midterm 3 (solution)

# ECON 100B - Spring 2007 - Wood - Midterm 3 (solution) -...

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Spring 2007 (IS – LM – BP and DAD – SAS Models) Econ 100B 1 of 12 Name: ________ ANSWERS __________ SID : ____________________________ Discussion Section: ________________ Economic 100B Macroeconomic Analysis Professor Steven Wood Spring 2007 Exam #3 ANSWERS Please sign the following oath: The answers on this test are entirely my own work. I neither gave nor received any aid while taking this test. I will not discuss the questions on this test until after 3:30 p.m. on May 11, 2007. ______________________ Signature Any test turned in without a signature indicating that you have taken this oath will be assigned a grade of zero. Graph Instructions When drawing diagrams, the following rules apply: a. Completely , clearly and accurately label all axis, lines, curves, and equilibrium points. b. The original diagram and equilibrium points MUST be drawn in black or pencil. c. The first shift of any curve(s) or line(s) and the new equilibrium points MUST be drawn in red. d. The second shift of any curve(s) or line(s) and new equilibrium points MUST be drawn in blue. e. The third shift of any curve(s) or line(s) and new equilibrium points MUST be drawn in green. Do NOT open this test until instructed to do so. Good Luck!

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Spring 2007 (IS – LM – BP and DAD – SAS Models) Econ 100B 3 of 12 A. Multiple Choice Questions . Mark the letter corresponding to the best answer in the assigned space at the bottom of the page. (3 points each; total of 30 points.) 1. Since 1980, globalization has increased enormously. This would suggest all of the following are more valid today than in 1980 EXCEPT: a. Relative capital mobility is a better description of the world than relative capital immobility. b. Differences in real interest rates across countries are lower. c. Some countries have large amounts of foreign reserves. d. When governments run budget deficits, interest rates now rise more. e. Capital account deficits and surpluses are larger in magnitude. 2. In the Mundell-Fleming model with flexible exchange rates, all of the following are true EXCEPT: 3. Suppose we have flexible exchange rates and the current account is +50. Then the capital account:

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