2020 Exam 2
Rubric for Question 1 (rubric by TA):
Up to 2.5 points for each of the following bullets:
carbon tax on fossil fuel emissions and methane leaks; give everyone an amount of transferable carbon tax equities.
the state establishes a goal for housing construction for each local government to meet, which would reduce regulatory and land costs; nationally standardized construction codes; increase construction productivity.
self-driving cars; dynamic tolls for road segments that are per vehicle; carpooling with ride-sharing service
writing: the argument effectively addresses the topic and has appropriate elaborations or exemplifications. No plagiarized sentence fragments. Word count between 400 and 600. Minor lexical or grammatical errors allowed. Students may bring in different ideas for each topic; but what Prof. Kimball wants to test is whether students read assigned blog posts.
Rubric for Question 2 (rubric by TA):
Up to 4 points for the first two bullets below; up to 2 points for the third bullet below:
List and briefly explain (1) Messing with the Price System. (2) Menu Costs. (3) Messing with Our Minds. (4) Messing with the Minds of Legislators. (5) Messing with Debt Contracts. (6) Messing with the Opportunity Cost of Holding Money. (7) Inflation Getting the Blame for Things It Doesn’t Do (8)Inflation Making Real Wage Cuts Go Down More Easily
The costs of inflation push the optimal inflation target toward zero. Benefits of inflation can push the optimal inflation target above zero. Students could use pervasive examples to illustrate this. For example, discuss how the inflation target affects real interest rate with Fisher effect.
write a well-organized and coherent essay; develop and support main points with logically compelling reasons; no plagiarized sentence fragments; word count between 400 and 600. Minor syntactic errors allowed.
Rubric for Question 3 (rubric by Miles):
1 point each for these bullets:
How the Fed determines the real interest rate r:
supply and demand for the monetary base determines nominal rate
inflation pi is sticky
r = i -pi
How rate cuts are stimulative
principle of countervailing wealth effects
borrower marginal propensity to spend > lender marginal propensity to spend
incentive effect ( also called substitution effect)
net exports go up because of depreciation
The role of monetary policy
Fed should keep AD equal to the natural level of output
in the long run, Fed can’t affect r
in the long run, the Fed can’t change other real things
Plus one point for anything else apt and interesting, but 10 points total is still the maximum.
Rubric for Question 4 (rubric by Miles):
One point for each of the following bullets:
imperfect competition wedge (firms cheer when employment up)
marginal tax rate wedge (IRS cheers when employment up)
labor market imperfection wedge (people who want jobs cheer when employment up)
minimum wage and unions contribute to labor market imperfection wedge
search frictions contribute to labor market imperfection wedge
efficiency wage contribution to labor market imperfection wedge; higher wages for gratitude
efficiency wage contribution to labor market imperfection wedge: higher wages for fewer quits
efficiency wage contribution to labor market imperfection wedge: higher wages for better motivation
explaining the role of the opportunity cost of time (for workers or potential workers) and explaining the marginal cost product of labor and price times the marginal physical product of labor
explaining which magnitude is the social marginal benefit of an extra hour of work and and which is the social marginal cost
Plus up to two points for anything else apt and interesting, but 10 points total is still the maximum.