Intermediate Macroeconomics
Juan Rubio-Ram´ırez
Fall 2020
Midterm 3
December 1st, 2020
You have at most 75 minutes to complete this test. Please, show all your work. During the exam, use of
electronic devices is strictly prohibited. You must remain in the room when you write your examination. You may
not refer to any books, notes, or other material.
Look over the entire exam before you start. Please be as concise as possible when writing your answers.
Whenever possible, use simple math or diagrams to help make your point more clearly. Be careful to answer each
of the question(s) asked (and nothing more) in a way that communicates clearly your understanding of the topic(s)
being addressed. In order words, you always need to justify your answers – it is implicit in every question that
you need to do so. There is a total of 100 points. Good luck!
Name:
EmoryID:
1
(48 Points)
1. (6 points each) Consider our basic two-period model of consumption/saving decisions, with household lifetime
utility given by
U=u(c)+βu(c′)
The household earns exogenous income yin the first period and y′in the second period, and can borrow
and save at the real interest rate r. Savings/borrowing is denoted by s. Assume that there are no taxes.
