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Unformatted text preview: Economics 208 Marek Kapicka Macroeconomics Spring 2009 Midterm Answers You have 75 minutes. This is a closed book/closed notes exam. No cell phones or calculators are allowed. Please write all your answers on the exam paper. There is 200 points in total. Good luck! Your name: (5 points) 1 Multiple Choice (5 pts each, 35 total). There is only one correct answer for each question. 1. In a fully-funded social security program A) the young pay for the benefits of the old. B) the young are forced to save for their own retirement. C) the young have to buy bonds for the old. D) the young are forced to save for the retirement of the old. 2. An important reason why Ricardian equivalence may fail is if A) borrowing and lending are done through intermediaries. B) government debt incurred today may not be paid off until after some current consumers are deceased. C) state and local governments also engage in debt finance. D) some consumers are borrowers, while other consumers are lenders. 3. The Ricardian Equivalence says A) whatever the level of government expenses, consumption is the same. B) whatever the timing of taxes, consumption is the same. C) higher government expenses reduce consumption. D) an increase in current consumption has to lead to a decrease in future consumption. 1 4. The experience of the U.S. economy during World War II confirms the predic- tion that a dramatic increase in government spending is likely to A) increase both real GDP and consumption. B) increase real GDP and decrease consumption. C) decrease real GDP and increase consumption. D) decrease both real GDP and consumption. 5. According to Valerie Ramey’s estimates, A) Increases in government spending increase both output and wages. B) Increases in government spending increase output but decrease wages....
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- Fall '08