Whitman ECON 407 - Exam (2 pages)

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Exam

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Whitman College
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Econ 407 - Monetary Theory and Policy
Monetary Theory and Policy Documents

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Whitman College Econ 407 Exam 1 October 4 2006 Write all answers in your blue book Thoroughly explain all of your answers The exam ends at 2 20 1 Suppose there are four traders Audrey Bradley Charley and Dudley Audrey produces artichokes but gets utility only from the consumption of blueberry poptarts Bradley produces blueberry poptarts but gets utility only from the consumption of cranberry muffins Charley produces cranberry muffins but gets utility only from the consumption of dandelion wine Dudley produces dandelion wine but gets utility only from the consumption of artichokes a 10pts Suppose these traders live in a monetary economy Describe a series of bilateral trades that in the end leaves everyone consuming his chosen good and which provides evidence supporting the conclusion that this economy is a monetary economy Explain your reasoning Be sure to include a definition of a monetary economy in your explanation b 10pts Now suppose these traders do not live in a monetary economy Describe a series of bilateral trades that in the end leaves everyone consuming his chosen good and which provides evidence supporting the conclusion that this economy is not a monetary economy Explain your reasoning 2 Consider The Economic Organization of a P O W Camp by R A Radford a 5pts According to Radford what caused inflation in the POW camp b 5pts What caused deflation in the POW camp according to Radford c 10pts What costs of inflation and deflation does Radford describe 3 a 10pts In Deflating the Case for Zero Inflation what does Rao Aiyagari mean when he says that inflation is a type of tax b 5pts What does Aiyagari believe would happen if the United States government eliminated the inflation tax 4 In the October 3 2006 Wall Street Journal article Reading the Bond Market s Tea Leaves to Deduce What s Ahead p R21 a WSJ reporter asked fund manager Liard Landmann Do you expect an economic downturn Mr Landmann replied We definitely expect a slowdown All the factors are in place



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