( 10 points ) In the Diamond model of overlapping the negative real interest rate r Oat Nationary equilibrium indicates that ( a ) there is no Pateto….
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( 10 points ) In the Diamond model of overlapping the negative real interest rate rOat Nationaryequilibrium indicates that( a ) there is no Pateto improvement in the model( b ) equilibrium trajectory is dynamically efficient( c ) there can be over-accumulation of capital want . the golden rule( d ) agents will have zero demand for money if they are introduced2 . ( 10 points ) Milton Friedman argued that over long periods of time , the average propensity to consume isconstant because , over these long periods of time( a ) the variation in income is dominated by the transitory component( b ) the variation in income is dominated by the permanent component( c ) it is the behavior of the average consumer that dominates( d ) income averages out to a constant3 . ( 10 points ) If the Baumol Tobin model of money demand is correct , then as the interest rate( a ) there will be no effect on the velocity of money( b ) the velocity of money will decrease( c ) the velocity of money will increase( d ) the effect , on the velocity of money cannot be determined4 . ( 10 points ) Ricardian equivalence refers to the same impact of financing government( a ) whether by printing money or raising taxes( b ) in the long run as in the short run( C ) whether by debt or taxes .( d ) in an open economy as in a closed economy( 10 points ) The theory behind Tobin’s a indicates that( a ) the stock market may be expected to predict every turning point in real GDI( b ) the stock market may be expected to be closely tied to fluctuations in output and employme( c ) every time investment goes up we would expect the stock market to go down( d ) the stock market and the economy are basically independent of each other