ECO202Y1 Study Guide - Final Guide: Real Wages, Production Function, Random Walk Hypothesis
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Student number: (total 35 points) (total 12 points, 3 points each) (total 12 points, 2 points each) 1) answer following questions: a) explain following concepts in detail: Staggering wage theory, solow residual, ricardian equivalence theorem, sacrifice ratio, intertemporal budget constraint, moral hazard in labor market. b) explain each of following consumption theories: She lives and earns income like the graph in below. Suppose the interest rate is zero, and she can borrow and lend. Find her optimal consumption, c*. (7) (total 18 points) 2) consider an open economy within the model of open economies with fixed price level. Suppose it is in its initial equilibrium, where i = i*, and nx = 0. Using a set of is-lm, uip, and nx curves to answer following questions. Starting from the initial equilibrium, suppose the foreign piece level rises. Starting from the initial equilibrium again, suppose the country has a credible pegged exchange rate regime.
