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# sample_questions - goods and denote the lump-sum transfer...

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Sample Midterm Questions: for the materials other than International Monetary Systems October 18, 2011 As most of the questions on the midterm will be multiple choice, this sample will give you an idea of what those questions will look like. This sample is not sufficient for studying the midterm. 1. Which of the following can serve as money? Consider the following OLG model in which consumers live for 2 periods. Suppose consumers have a log utility function. Consumers receive endowment y 1 in terms of consumption good when they are young, and y 2 when they are old. Assume that y 1 > y 2 0 . Denote the number of people born in period t as N t . Assume that the population growth rate is n (i.e., N t +1 = N t , t ). Assume that the consumption good is non storable. Now suppose that there is money in this economy, and the money supply in period t is denoted by M t . Assume that money supply grows at rate z (i.e., M t +1 = zM t ). The new money printed each period is transfered back to the old generation in terms of consumption

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Unformatted text preview: goods, and denote the lump-sum transfer by a t +1 . Note that we are considering stationary allocations. 2. What is the feasiblity constraint for this economy? a. c 1 + z n c 2 = y 1 + z n y 2 b. c 1 + z n c 2 + a = y 1 + z n y 2 c. c 1 + 1 n c 2 = y 1 + 1 n y 2 d. c 1 + 1 n c 2 + a = y 1 + 1 n y 2 e. None of the above. 3. Which ones of the following statements are always true? a. v t +1 v t = p t +1 p t b. If z > n , then there is deﬂation in the economy. c. If z = n , then the equilibrium outcome is Pareto eﬃcient. 1 d. a) and c). e. None of the above. 4. Now assume that y 2 ≥ y 1 > 0. What is true about the new equilibrium? I. There will be no trade in the equilibrium. II. The CE with money and the CE without money will have the same equilibrium allocations. III. The CE with money is still Pareto eﬃcient. a. I and III. b. II and III. c. I and II. d. I, II, and III. e. None of the above choices. 2...
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sample_questions - goods and denote the lump-sum transfer...

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