You may have a calculator at your seat if you wish. All material must be committed to memory. You will flunk this course if you have flash cards at your seat or talk during the exam. Write in ink and not in pencil
The test will cover Chapter 4, 6-10 in the Macroeconomics split. Chapter 6 is titled "Introduction to Macroeconomics" and Chapter 10 is titled "The Government and Fiscal Policy" That material was background material.
The exam will be 6 pages long and there will be two exams.
Page 1: Between 10 and 20 multiple choice questions on the definitions listed below:
1. Definitions: 20 points
The list below covers at least 80 percent of the short questions. The others will be something I mentioned in class.
2. Math: 40 points
The math has the following format. 30 points will be sample problems with be minor modifications. The last 10 points goes beyond the notes. There will be 10 points in bonus problems, a real challenge.
a. Index number problem (5)
b Two equation dynamics [Macromodels I] (10)
c. Two equation Y = C + I + G model (10)
d. Derive the multiplier for a new model (5)
e. One or more bonus problems.
3. Technical essay: 20 points: To be graded by your TAs
First you will make some calculations with the three equation tax rate model; the one that adds T = tY. You will calculate the change is Y and the change in T from a decrease in t. Then how much does I have to increase to bring T up to the precut level.
Either A or B
A.It is true that a business renaissance started in the Reagan administration. You need to be able to intelligently analyze the factors promoting this business renaissance. For example, does a tax cut primarily affects consumption (Keynesian belief) or does a tax cut primarily makes people work harder and increases investment(supply sider belief). You should check the investment data for the Reagan administration. The combination of Reagan's tax cut and Volker's efforts to eliminate inflation produced a blow torch on the ass for producers who had to compete against cheap imports. Is this a better explanation than the supply sider explanation. To get a good score you need to base your discussion of facts.
B. What is meant by fine tuning the economy. Theoretically is this possible?
Does reelection politics and one other factor make this possible. Discuss! What
happened to the fine tuning efforts of the 60s in the 70s. Find the material
in the book. Do not send me e-mail. You should be able to use the index (stagflation)
THE PURPOSE OF THIS EXERCISE IS TO GET YOU TO AVOID SIMPLISTIC THINKING!!!!!!
Information: If your group finds information that other groups do not have you are better off. Ch18 has a discussion of supply siders. Read it. Read about stagflation in CH6 (Does that look like fine tuning the economy. Check out the maco data in the Math Notes. What were gov deficits before and after 64 when the Keynesian tax cut went through. What happened to real investment, consumption and tax revenues in the Reagan administration.
If we are going to compete in world markets, we have to train you to deal with new situations. I realize this may be different from what you are accustomed.
4. Current events: 20 points
The questions in your report. You will get a subsample of questions and there are two exams.
1. New Economy
a. How is the US economy being transformed?
b. What is Europe doing about the New Economy?
c. How is Asia adjusting to these developments?
2. Budget Surplus
a. Why are we having a budget surplus now?
b. What are the projections?
c. What do the top 4 candidates for the Presidency with the surplus?
3. Budget
a. What has been the deficit since Reagan took office.
b. What are the major sources of revenues and expenditures.
c. What is the projected growth of social security and the medical programs.
Mon: 27 Sep 99