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Econ 2105 Principles of Macroeconomics Spring 2012 Sample Exam 1
Econ 2105 Principles of Macroeconomics Spring 2012 Sample Exam 1

The U.S. Taxpayer Relief Act of 1997 and the Subsequent Housing Bubble:
The U.S. Taxpayer Relief Act of 1997 and the Subsequent Housing Bubble:

... that she has in her investment portfolio. For ease of exposition and without loss of generality, the general equilibrium model I used in Lim (1997, 2009) is deterministic or nonstochastic. There are many identical infinitely-lived agents who enter any given period holding last period‟s housing stock ...
Mankiw 5e Chapter 4
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... A. inflation causes restaurants to update their menus more often. B. inflation reduces distortions to relative prices. C. if nominal wages are fixed, inflation decreases real wages. D. if nominal wages are fixed, inflation increases real wages. ...
Money, New-Keynesian Macroeconomics and the Business Cycle
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... We adopt in this model a monopolistic market structure à la Blanchard and Kiyotaki [1987]7 . As the elasticity of substitution between the different goods entering in the utility function is not infinite, each firm has a monopoly power on its market. As this elasticity is strictly positive, each fi ...
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... • The classical economists’ world was one of fully utilized resources. • In the 1930s, Europe and the United States entered a period of economic decline that could not be explained by the classical model • John Maynard Keynes developed an explanation that has become known as the Keynesian model. ...
(Download, 652 KB)
(Download, 652 KB)

... relatively high in most energy importing countries. This suggests that the current effects of energy price hikes are different from the seventies and early eighties. In general, there are two categories of explanations. First, the difference can be caused by a change in the economic structure, in pa ...
Lecture 15: AD-AS
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... 3. The Misperceptions Theory  If firms see a lot of people buying their goods, they can’t tell the difference between:  Their price being “too low” (P > PE, but the firm hasn’t adjusted its price)  Demand from their product is high, but P = PE causing them to increase production ...
Hyperinflation Survival Guide
Hyperinflation Survival Guide

... couple in 2011. After all, a single trip abroad can cost $15,000. In a world with no inflation, they would continue on their affluent round, year after year. But Mr. and Mrs. Jones, along with the rest of America, have crossed the Bernholz line, and so they face a 17% annual rate of inflation. It’s ...
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... Prescott (1982)) looked at technology shocks to explain cyclical behavior. Thus, an important difference between the Lucas-Rapping approach and early real business cycle models is that the former, but not the latter, introduces frictions to explain business cycles. With these new classical models, t ...
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Lecture Outline

... Teaching advice † Highlight the fact that all three of these effects begin with a decrease (or increase) in the price level and end with an increase (decrease) in aggregate quantity demanded. † Remind students that the aggregate demand curve (like all demand curves) is drawn assuming that all else i ...
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... This prediction of the model is different than that which ignores wealth effects. ...
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... 1.Real GDP is the value of the final goods and services produced calculated using the prices of a selected base year. 2. Except in the base year, real GDP is not the same as nominal GDP, the value of aggregate output calculated using current prices. 3. Analysis of the growth rate of aggregate outpu ...
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HW6-sol

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... perfect information and may respond incorrectly to any changes in the economy, actually making conditions worse. Second, expectations are not constant and may change in response to change in policy, making the end result of these policies unpredictable. Third, there are lags in policy, meaning that ...
modeling and forecasting inflation in developing countries - cerge-ei
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Shocks and Frictions in US Business Cycles: A Bayesian DSGE
Shocks and Frictions in US Business Cycles: A Bayesian DSGE

... address a number of key issues. First, what are the main driving forces of output developments in the United States? Broadly speaking, we confirm the analysis of Matthew D. Shapiro and Mark Watson (1988), who use a structural VAR methodology to examine the sources of business cycle fluctuations. Whi ...
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... The equation is vertical. In the short run, however, a fraction of firms keep prices fixed at a predetermined level, implying a positive relationship between other firms’ prices, which are not constrained, and marginal costs, proxied by the output gap. The AS equation is a positively sloped price-ou ...
CHAPTER 1 ECONOMIC MODELS
CHAPTER 1 ECONOMIC MODELS

... should rise by about two percent."3 For example, after manipulating the simple supply-and-demand model shown above in Figure 1.1 and represented mathematically in Figure 1.2, and supposing this to represent an actual market for a commodity like an automobile, with data available, the econometrician ...
Chapter 11: Unemployment and Inflation
Chapter 11: Unemployment and Inflation

... less cash or the additional wear and tear necessary to hold less cash (more frequent trips to Banks and ATMs);  Tax system and financial system do not always fully adjust to anticipated inflation. ...
Understanding Stock Market Fluctuations
Understanding Stock Market Fluctuations

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Frank & Bernanke

...  Explain what happens to AD at higher levels of inflation and use this new diagram.  Include the self-correcting mechanism of the economy by differentiating short run aggregate supply (Keynesian) from the long run aggregate supply (Classical). ...
Demand from China: Fact or Fiction?
Demand from China: Fact or Fiction?

... increasing production of goods, with the result that China now produces and supplies more commodities than most other countries. It consumes mostly its own supply of commodities, not the remaining world supply. It is, in fact, a net contributor to world commodity supply, not a net taker. As a result ...
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Nominal rigidity

Nominal rigidity, also known as price-stickiness or wage-stickiness, describes a situation in which the nominal price is resistant to change. Complete nominal rigidity occurs when a price is fixed in nominal terms for a relevant period of time. For example, the price of a particular good might be fixed at $10 per unit for a year. Partial nominal rigidity occurs when a price may vary in nominal terms, but not as much as it would if perfectly flexible. For example, in a regulated market there might be limits to how much a price can change in a given year.If we look at the whole economy, some prices might be very flexible and others rigid. This will lead to the aggregate price level (which we can think of as an average of the individual prices) becoming ""sluggish"" or ""sticky"" in the sense that it does not respond to macroeconomic shocks as much as it would if all prices were flexible. The same idea can apply to nominal wages. The presence of nominal rigidity is animportant part of macroeconomic theory since it can explain why markets might not reach equilibrium in the short run or even possibly the long-run. In his The General Theory of Employment, Interest and Money, John Maynard Keynes argued that nominal wages display downward rigidity, in the sense that workers are reluctant to accept cuts in nominal wages. This can lead to involuntary unemployment as it takes time for wages to adjust to equilibrium, a situation he thought applied to the Great Depression that he sought to understand.
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