MATH 246 Midterm: Exam 3 Solutions Spring 2003
14 Mar 2019
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Instructions: there are two parts to this exam. The rst part has 6 short questions, worth 8 points each. The second part has 3 longer, analytical questions, worth 24, 24, and. There are a total of 9 questions and 100 points on the exam. You are not allowed to use calculators, books or notes. Part i: short questions (8 points each) answer each question as true, false or uncertain and explain why. Your grade will be primarily based on your explanation: suppose congress cuts taxes while the federal reserve increases the money supply. These policies, in combination, will raise output, prices, and the real interest rate in the short run. The tax cut shifts the is curve up, and the increase in the money supply shifts the lm curve down. The policies, which are both expansionary, combine to shift aggregate demand upward, boosting output and increasing prices in the short run.
