Download Previous Final Exams | Financial Markets and Economic Fluctuations | ECON 423 and more Exams Financial Market in PDF only on Docsity! 1 Econ 423: Essay Questions and Problems from Previous Final Exams Fall 2004 1. Use at least one graph to help you briefly describe the relationship between the business cycle and the levels of federal budget deficits or surpluses. [40 Points.] 2. Provide a brief explanation for why more than 70% of major mergers and acquisitions in the past decade have failed, in the sense that market capitalization of the merged companies has declined relative to other firms in their industries. [30 Points.] 3. Explain how tournament theory can be used to rationalize as efficient the fact that some corporate CEOs receive compensation that seems exorbitantly in excess of the values of their marginal products. [30 Points.] 4. How are the supplies and demands for loanable funds affected by: (a) government deficits or surpluses? (b) increases in the Dow-Jones index? (c) expectations of a boom, or of recession? (d) expectations about inflation? (40 points.) 5. Explain how the consolidated three-part budget proposed by Richard Musgrave deals with economic stabilization, and ensure that you discuss the implications for the absorption equation [G—T = S—I + M—X], and [G-T= ∆M + ∆ MB]. Fall 2003 II Matching 5 points each Match the following individuals with the short term target that they would advocate as most appropriate for a central bank in its conduct of monetary policy. Print answers in the left margin. 1. Alan Greenspan 2. John Maynard Keynes 3. Knut Wicksell 4. Milton Friedman 5. Ben Bernanke a. Stable exchange rate b. Appropriately stabilizing interest rate c. Stable monetary growth rate d. Low and stable rate of inflation e. Price level stability f. Low unemployment rate g. Stable wage rate 2 Match these graphs (below) to the unique label that characterizes it best. Loanable Funds Market Price Determination per Fisher’s Equation of Exchange Keynesian Liquidity Preference Gold Standard (John Stuart Mill The supply of gold is perfectly elastic) Lerner Price Reaction Function Cambridge Equation
