Midterm Exam 1 ECON 209 & 209H: Intermediate Macroeconomics Note: You need to answer. 4 questions on this exam. All students need to answer questions 1, 2, and 3. Question 4 is for ECON 209 students ONLY and question 5 is for ECON 209H students ONLY. You have 75 minutes. Good luck! 1. Answer the following questions. (a) (5 points) Using economic intuition, explain why labor supply is an increasing function of wage. Explain what assumption we are making to derive an upward-sloping labor supply curve. (b) (5 points) Using economic intuition, explain why the marginal rate of substitution between leisure and consumption is the subjective value of leisure. (c) (5 points) Using economic intuition, explain why the solution to the representative consumer's utility maximization problem is such that marginal rate of substitution is equal to the wage. (d) (5 points) Using economic intuition, explain why CPI is biased upward