ECON482 Midterm: ECON 482 UofA E482Midterm 11
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You have 50 minutes to do this exam. The number in brackets next to each question indicates the maximum number of marks that can be earned on that question. There are 100 marks in total (two marks per minute). No notes or other material (including all types of electronic devices) may be consulted during the exam. Answers can be in point form and should be brief and to the point. Discuss the differences (ie. , assumptions, predictions, implications) between models with rational expectations (re) and models with adaptive expectations (ae). Use words and a diagram to explain the lucas critique and the implications it has for policy analysis and macro modeling. (15) (15) Aggregate supply: y p t y t pe t. Interest rate rule: y t y (r t r t pm t y t r t. 2 where ut and t are independent mean zero exogenous random variables with variances.
