2022 Exam 2

Practice Exam for Exam 2: 2019 Exam 2

Additional Practice Exam for Exam 2

Videos to Help You Prepare for the Exam

Exercises and Slides to Help You Prepare for the Exam

Helpful Hints

Additional Readings for Exam 2

2020 Exam 2: 2019 Exam 2 is better for a practice exam, because it is multiple choice, which is how I normally do exams in Economics 3080. In Spring 2020, in the early days of the pandemic, I did an essay exam for Exam 2. I think you will find these questions and the rubric for grading them very useful for studying, in a different way. Here they are:

2020 Exam 2 Questions

Rubric for Grading 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 Grading 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 Grading 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 Grading 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.