# Fall 2019 Exam 2 Solution

Here are the final numerical results for each section of the exam. You can use them to check your work if you do the exam for practice. If you have trouble with the problems, or don't get the answers shown here, stop by during office hours or make and appointment and we can go over them.

### Question 4

(a) Household C has CD preferences with b=0.6. Diagram omitted but it should contain the budget constraint, the equilibrium, and at least one indifference curve.

(b) M_2 = $3620; X_2 = 543; Y_2 = 362; the policy has a strong impact: it raises X by 36% and lowers Y by 55%; \Delta Rev =$18 and the policy succeeds in roughly breaking even; CV = 518 and the household is worse off; \Delta SS = -500.

### Question 5

X_1 = 252, Y_1 = 112; X_2 = 140; \Delta Rev = 560; CV = 840, worse off; substitution effect = -77, income effect = -35.

### Question 6

PVIs: BAU = 120k, A = 125k, B = 123k; program A is best; C_0 = 80,357; C_1 = 53,571; borrows 40,357; diagram omitted but it should show the BC with training program A, the consumption bundle, and at least one IC.

URL: https://wilcoxen.maxwell.insightworks.com/pages/5576.html
Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 10/29/2020