Problem Set _3 ANSWERS - Name: _ (Last name, first name)...

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Problem Set #3 (Spring 2011) 1/5 Name: _________________________ (Last name, first name) SID: _________________________ GSI: _________________________ Econ 100B Macroeconomic Analysis Professor Steven Wood Spring 2011 Problem Set #3 ANSWERS Due: March 15, 2011 (in class before 3:50:01 p.m.) Turn your completed problem set in to your GSI Please sign the following oath: The answers on this problem set are entirely my own work. I neither copied from the work of others nor allowed others to copy from my work. _______________________________________ Signature Any problem set turned in without a signature will be assigned a grade of zero. Problem Set Instructions 1. You MUST complete your problem set on this template. 2. Graphs and equations MAY be drawn by hand. When drawing diagrams, clearly and accurately label all axis, lines, curves, and equilibrium points. 3. Explanations MUST be word-processed. Your explanations should be succinct and to the point.
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Problem Set #3 (Spring 2011) 2/5 A. Multiple Choice Questions (15 points) . Circle the letter corresponding to the best answer (3 points each). 1. When debt levels are very high, increases in the real interest rate have a larger effect on consumer spending, business investment, and net exports than they do when debt levels are much lower. As a result, higher debt levels would have the effect of: a. Making the AS curve flatter. b. Making the AD curve flatter. c. Making the AS curve less response to output gaps. d. Making the AS curve more responsive to output gaps. 2. Suppose that the central bank has underestimated the economy’s potential output level. If the central bank then pursues a policy to keep the economy at what it thinks the economy’s potential output level is, this will result in: a. Deflation. b. Disinflation. c. Hyperinflation. d. Higher inflation. 3. If a country is running a net export deficit, the most effective way of eliminating that net export deficit would be to _____ government purchases and _____ the domestic money supply. a. Increase; increase. b.
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This note was uploaded on 08/28/2011 for the course ECON 100B taught by Professor Wood during the Spring '08 term at University of California, Berkeley.

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Problem Set _3 ANSWERS - Name: _ (Last name, first name)...

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