Econ100B Midterm Sample Thomas Wu

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ECON 100B – INTERMEDIATE MACROECONOMICS Professor Thomas Wu Spring 2012 Second Midterm – Sample (May 18, 2012) Name: _________________________________ Instructions: i. You have 1 hour and 10 minutes to finish this exam; ii. No questions will be taken (it is your job to interpret and understand the question); iii. The exam is supposed to be long, so do not panic if you feel like you are not going to finish it (probably all other students are feeling the same way); iv. No cheating will be tolerated! Don’t talk to any other student, don’t look at any other exam, don’t leave any book or notes open around you, and don’t use cell phones or MP3 players. Any suspicious activity will result in receiving a ZERO on the exam! v. You MUST write your answer in the indicated space in order to get credit. vi. Good luck and remember: just try the best you can. Part I – Multiple Choices (2 points each, 8 points total) 1) Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for a tax cut. This fiscal expansion will, in the medium run, have no effect on which of the following? A) The price level. B) The interest rate. C) Employment. D) All of the above. E) None of the above. Answer: ___ 2) As the proportion of labor contracts with wage indexation increases, we would expect that: A) nominal wages will become more sensitive to changes in unemployment. B) a reduction in unemployment will have a smaller effect on inflation. C) the natural rate of unemployment will decrease. D) the natural rate of unemployment will increase. Answer: ___ Page 1 of 14 3) For this question, assume that the Phillips curve equation is represented by the following equation: πt - πt-1 = (μ + z) - αut. Given this information, the natural rate of unemployment will be equal to: A) μ + z B) α(μ + z) C) (μ + z)/α D) (μ + z - α) E) 0 Answer: ___ 4)