rule, and which worsen it? Explain briefly. a. A stable or an unstable velocity of money b a steep or a flat IS curve c a stable or an unstable demand for money d. accurate or inaccurate forecasts of the main economy aggregates The median on this exam was 60. The high was 94 Econ 301 Exam #3 Fall, 1994 Professor Twomey Please PRINT your name on the BACK of the LAST sheet. Answer on both sides of these sheets, as necessary. Ask for clarification of any unclear question. Questions are equally weighted. Good luck. 1. Identify the following with a sentence or at most two: a) natural rate b) policy ineffectiveness postulate c) hysteresis d) transitory income e) efficiency wage 2. State and explain briefly three components of the user cost of capital. How will government fiscal (or monetary) policy affect each of those three components, if at all? Explain briefly. What is the difference between intendedand unintended inventory accumulation, and why might it be important? 3a). Explain and illustrate with a graph (or two) how the predictions would differ between a Keynesian and a New Classical Economist, as to what would happen be the short term effect in the labor market if there were an expected increase in the money supply. According to our text, with which - if any - of these two visions would a monetarist agree, and why? 4a). Show on a graph how, according to the Life Cycle Hypothesis, a person's savings would be expected to change over time. Explain briefly how that relationship would change if: a) social security programs were eliminated b) there were a stock market crash during the person's middle age c) the person were poor and did not have good access to capital markets as a youth 5) In the text we studied two new orientations in macroeconomics, called real business cycle and new keynesian. The following are some factors which, according to one (or both) theory(ies), will affect output and employment. For each one, identify which model, state how the factor would affect output and employment, and explain the reasoning used by the particular school. Sometimes graphs help in these explanations. i) There is a decline in unionization in the economy's labor force
rule, and which worsen it? Explain briefly. a. A stable or an unstable velocity of money b a steep or a flat IS curve c a stable or an unstable demand for money d. accurate or inaccurate forecasts of the main economy aggregates The median on this exam was 60. The high was 94 Econ 301 Exam #3 Fall, 1994 Professor Twomey Please PRINT your name on the BACK of the LAST sheet. Answer on both sides of these sheets, as necessary. Ask for clarification of any unclear question. Questions are equally weighted. Good luck. 1. Identify the following with a sentence or at most two: a) natural rate b) policy ineffectiveness postulate c) hysteresis d) transitory income e) efficiency wage 2. State and explain briefly three components of the user cost of capital. How will government fiscal (or monetary) policy affect each of those three components, if at all? Explain briefly. What is the difference between intendedand unintended inventory accumulation, and why might it be important? 3a). Explain and illustrate with a graph (or two) how the predictions would differ between a Keynesian and a New Classical Economist, as to what would happen be the short term effect in the labor market if there were an expected increase in the money supply. According to our text, with which - if any - of these two visions would a monetarist agree, and why? 4a). Show on a graph how, according to the Life Cycle Hypothesis, a person's savings would be expected to change over time. Explain briefly how that relationship would change if: a) social security programs were eliminated b) there were a stock market crash during the person's middle age c) the person were poor and did not have good access to capital markets as a youth 5) In the text we studied two new orientations in macroeconomics, called real business cycle and new keynesian. The following are some factors which, according to one (or both) theory(ies), will affect output and employment. For each one, identify which model, state how the factor would affect output and employment, and explain the reasoning used by the particular school. Sometimes graphs help in these explanations. i) There is a decline in unionization in the economy's labor force
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