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HONORSMIDPART2ANS - Eco 103 Honors Macro N Sheflin Midterm...

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Eco 103 Honors Macro N. Sheflin Midterm PART II ANSWERS Very briefly answer each of the following in the space provided. Leave out all “the’s, a’s and and’s” – use brief phrases as necessary. If absolutely essential, you can show additional work on the back of the sheet. Assume you are talking to a smart friend. 1) What would Keynes have said about the cause and cure for the 2007-09 recession? FALL IN AGG D/ G TO REPLACE LACK OF PRIVATE SPENDING 2) a) What is money? b) Why is money ‘good’ (for an economy? a) ASSET WIDELY USED IN EXCHANGE b) REDUCES TRANSACTIONS AND SEARCH COSTS/ INCREASES ECO EFFICIENCY/ALLOWS DEVELOPMENT OF FINANCIAL SYSTEM 3) 4 Differences between monetary and fiscal policy 1) M: LONG IMPACT, SHORT IMPLEMENTATION, F: THE OPPOSITE 2) M: INDEPENDENT, F POLITICAL 3) M: FED F: CONGRESS, PRES 4) M: INT RATES, INV F: DIRECT SPENDING PUSH ON A STRING 4) a) Sketch aggregate supply and demand curves, label the axes and equilibrium values.
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