Econ202_final_06 - NAME: Sabanc University ECON 202 /...

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NAME: Sabancı University ECON 202 / MACROECONOMICS Fall 2006 / Section C FINAL EXAM January 27 CLOSED BOOK AND NOTES ANSWER ALL SIX QUESTIONS TOTAL TIME: 120 minutes Q (1) / Q (2) / Q (3) / Q (4) / Q (5) / Q (6) /
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Consider the (desired) saving and (desired) investment curves that we use to analyze the goods market in a closed economy. (a) What factors are constant along the (desired) saving curve? (b) What factors are constant along the (desired) investment curve? In each of the following parts, draw a diagram with saving and investment measured along the horizontal axis and real interest rate measured along the vertical axis. (c) Suppose current real output de creases. What happens to the equilibrium interest rate? To saving? To investment? Explain. (d) Suppose current real output stays the same, but expected future output and expected future marginal product of capital in crease. What happens to the equilibrium interest rate? To saving? To investment? Explain. (e) Suppose current real output stays the same, but expected future output in creases and expected future marginal product of capital de creases. What happens to the equilibrium interest rate? To saving? To investment? Explain. (f) Suppose current real output in creases, and, at the same time, expected future output and expected future marginal product of capital de crease. What happens to the equilibrium interest rate? To saving? To investment? Explain. 3
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Econ202_final_06 - NAME: Sabanc University ECON 202 /...

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