Fall 2008 Midterm Exam Part 2

Fall 2008 Midterm Exam Part 2 - Department of Economics...

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Department of Economics University of Maryland Economics 325 Intermediate Macroeconomic Analysis Midterm Exam – Part 2 Professor Sanjay Chugh Fall 2008 October 16, 2008 NAME: Part 2 of the Exam has a total of three (3) problems and pages numbered one (1) through six (6). Each problem’s total number of points is shown below. Your solutions should consist of some appropriate combination of mathematical analysis, graphical analysis, logical analysis, and economic intuition, but in no case do solutions need to be exceptionally long. Your solutions should get straight to the point – solutions with irrelevant discussions and derivations will be penalized. You are to answer all questions in the spaces provided You may use one page (double-sided) of notes. You may not use a calculator. Problem 3 / 11 Problem 4 / 15 Problem 5 / 24 TOTAL PART 2 / 50
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1 Problem 3: Government Budgets and Government Asset Positions (11 points). Just as we can analyze the economic behavior of consumers over many time periods, we can analyze the economic behavior of the government over many time periods. Suppose that at the beginning of period t , the government has zero net assets . Also assume that the real interest rate is always r = 0. The following table describes the real quantities of government spending and real tax revenue the government collects starting in period t and for several periods thereafter. Period Real government expenditure ( g ) during the period Real tax collections during the period Quantity of net government assets at the END of the period t 10 12 t +1 8 14 t +2 15 10 t +3 10 10 t +4 8 12 a. (7 points) Complete the last column of the table based on the information given. Briefly explain the logic behind how you calculate these values.
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This note was uploaded on 09/07/2011 for the course ECON 325 taught by Professor Chugh during the Fall '08 term at Maryland.

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Fall 2008 Midterm Exam Part 2 - Department of Economics...

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