Problem Set 4 (1) - ECON 202 MACROECONOMIC THEORY Problem...

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Unformatted text preview: ECON 202 MACROECONOMIC THEORY Problem Set 4 – Answer Key MULTIPLE CHOICE 1 C 11 E 21 A 31 C 41 B 2 C 12 E 22 E 32 B 42 B 3 E 13 C 23 E 33 A 43 A 4 C 14 D 24 D 34 E 44 D 5 D 15 D 25 C 35 D 45 D 6 D 16 A 26 D 36 B 46 C 7 E 17 C 27 A 37 B 8 A 18 C 28 B 38 D 9 A 19 B 29 D 39 E 10 D 20 C 30 B 40 D LONG QUESTIONS 1 1) Y = Z = C + I + G + NX Y= C0 + c1 Y + i0 + i1 Y + xY* - (mYε)/ε Yequilibrium(1-c1 – i1 +m) = Co + c1 Y + i0 +xY* Yequilibrium=(C0+c1Y+i0+xY*) 1/(1-c1-i1+m) 2) ΔY/ΔY* = x/(1-c1 – i1 + m) > 0 ΔNX/ΔY* =x – m (ΔY/ΔY* )= x(1-m/(1-c1 – i1 +m)) >0 Turkeys trade balance improves 3)ΔNX/Δx & ΔNX/Δm ? NX = XY* - mYε/ε when both x and m increases we cant tell whether NX is increasing or decreasing. 4) Et = ¡¢£ ¡¢£¤ (Et+1) e 5) In this question there is no change in Money supply yet it is announced for next year. Hence, only expected i is efected not i itself....
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Problem Set 4 (1) - ECON 202 MACROECONOMIC THEORY Problem...

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