Final_Exam_Ceyhun

Final_Exam_Ceyhun - Final Exam 120 minutes Econ 1102.34:...

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1 Final Exam 120 minutes Econ 1102.34: Principles of Macroeconomics Ceyhun Elgin Monday, May 7, 2007 Name: _______________________________________________ On the following pages, please show all of your work. If you need more space, use the back of the page. Clearly state where your work/answer are. Clearly highlight/circle solutions. Calculators are NOT allowed. You may leave answers as fractions. Fully label all graphs. Read each question carefully and be sure to answer all parts of every question. There should be 17 pages including the cover sheet.
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2 Question 1 (15 points) Define the following 6 terms: a) Structural Unemployment b) Discount Rate c) M2Y
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3 d) Monetary Base e) Phillips Curve (both short and long run) f) Net Capital Outflow
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4 Question 2 (15 points) Consider the following economy: Consumption: C = 25 + 0.75( Y T ) Investment: I = 3 0.25 i Government spending: G = 12 Taxes: T = 20 Money supply: M S = 80 Money demand: M D = ( Y i ) P , where i is interest rate in percentages, C is consumption, Y is nominal GDP, I is investment, G is government expenditures, T is taxes, M S is money supply and M D is money demand. a) Assuming that the price level is P = 2, find the equilibrium real output, interest rate, consumption and investment.
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5 b) Now assume that the government increases spending so that G = 17 . Answer part (a) again c) What would be the change in the equilibrium output in part (b) in the simple model without the money market? (Hint: Think about the expenditure multiplier!) Compare this to the change in output in part (b) and explain why there is a difference
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6 Question 3 (8 points) Suppose that the value of the capital stock of the Turkish economy at the end of 1976 was
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This note was uploaded on 01/28/2012 for the course ECON 1102 taught by Professor Someguy during the Fall '07 term at Minnesota.

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Final_Exam_Ceyhun - Final Exam 120 minutes Econ 1102.34:...

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