MGEC06H3 Midterm: MGEC06-2014 Summer Test1 solution.pdf
19 Jun 2014
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The university of toronto"s code of behaviour on academic matters applies to all. The code prohibits all forms of academic dishonesty including, but not limited to, cheating, plagiarism, and the use of unauthorized aids. Students violating the code may be subject to penalties up to and including suspension or expulsion from the university. Question-1 [40 points] answer the following questions: (8 points) an economy is characterized by the following: L = 300 (y y )/ y = 2. 0(u un) un = 0. 05 (5%) Suppose that the money supply has been constant for many years at ms = 600. Now suppose there is an unexpected increase in autonomous consumption such that the ad curve becomes. Show your answers in one as-ad diagram making sure to label all the critical points. There is no shock as the money supply has been constant for many years therefore expected price will be equal to the actual price and:
