Midterm2sample1 - CORNELL UNIVERSITY Professor Levon...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
CORNELL UNIVERSITY Professor Levon Barseghyan Econ 3 02 Second Mid-Term Exam The answers should be short and straight to the point. First provide the answer, and then briefly explain how you got this answer. 1. (30 points) Suppose that the price level is fixed in the short run so that the economy doesn't reach general equilibrium immediately after a change in the economy. For each of the following changes, what are the short run effects on the real interest rate and output? Assume that in the short run firms are willing to produce enough output to meet the aggregate demand for goods. Assume that the goods market and asset market are always in equilibrium. Hint: use the aggregate demand and supply or IS-LM apparatus developed in class to figure what happens to output after the change. If you are using AD-AS framework, also use the asset market equilibrium condition to figure out what must happen to the interest rate in order for demand and supply of real balances to equal each other.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern