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Enron Mail |
David Levine
BA E201B Macroeconomics Fun Midterm The figure in [brackets] indicates the points and the suggested time for that question. The exam is designed to take 70 minutes, but you have 80 minutes to complete it. (To be honest, 50 minutes should suffice.) PLEASE KEEP WITHIN THE TIME LIMIT. Be sure to write the starting and ending times on the exam you turn in. The exam is closed book. If you are turning in a written copy, please write on only one side of a page, and if your handwriting is as bad as mine, please skip lines. Label all diagrams clearly. If you are writing on a PC, feel free to place diagrams on a separate paper. I) False, or Uncertain, and Why? The grade you receive depends solely on the quality of your explanation. If you are not sure of what the question assumes, simply state your own assumptions clearly, and answer based on these assumptions. Most of the answers should be fairly brief. When in doubt, state your assumptions (classical vs. Keynesian, long- vs. short-run,...). Answers in this section should typically be two paragraphs, or one paragraph and some bullet points. Avoid one-word answers or bullets. 1. [10] The government should promote a higher rate of saving to increase output in the long run. 2. [10] Productivity has risen in recent years in the United States because many new workers have joined the labor force to take advantage of the booming economy. 3. [10] An unexpected fall in inflation hurts lenders since the nominal value of the payments they receive is reduced. II) Longer answers 4. [20] Illustrate the effects of the recent decision by the European Central Bank to alter its monetary policy using the ISLM diagram. If European output is currently below the level associated with NAIRU, is their decision correct? Explain. 5. [20] Suggest a cost-effective government policy to increase the human capital in the country. How (if at all) would your answer differ for Brazil vs. Germany? David I. Levine Associate professor Haas School of Business ph: 510/642-1697 University of California fax: 510/643-1420 Berkeley CA 94720-1900 email: levine@haas.berkeley.edu http://web.haas.berkeley.edu/www/levine/
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