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Saka Econ 010 F12 Final Exam.pdf
Saka_Econ_010_F12_Final_Exam.pdf
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Saka Econ 010 F12 Final Exam.pdf-Final Exam ECON 0...
Saka_Econ_010_F12_Final_Exam.pdf-Final Exam ECON 010, Fall 2012
Saka Econ 010 F12 Final Exam.pdf-Fi...
Saka_Econ_010_F12_Final_Exam.pdf-Final Exam ECON 010, Fall 2012
Page 8
NAME:
RI’s NAME:
8. The amount of currency the Federal Reserve prints is equal to the income of the US.
True
False
9. If the Government’s primary target was balancing the budget instead of reducing the unemployment
rate, recessionary periods would be shorter and less severe.
True
False
10.
If total US employment increased by 5 million workers, it must be the case that the total US
unemployment declined by 5 million workers.
True
False
11.
MPC
+
MPS
=1
True
False
12. The federal government debt increases whenever the federal government runs a budget deficit.
True
False
13. In the US, business cycles have been symmetric, with expansions and recessions occurring at periodic
intervals, lasting an equal number of weeks.
True
False
14. Expansionary monetary policy tends to cause recessions.
True
False
15. Whenever the aggregate supply curve intersects the aggregate demand curve the economy is pro-
ducing full employment output.
True
False
8
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NAME:
RI’s NAME:
Part 3: Short-Answer Questions (25 points)
1.
(5 points) In 2-3 sentences, describe a situation in which unemployment rate increases while the
number of employed people increases.
2. (5 points) 2. Consider an economy going through a recession, with 2% frictional, 3% structural, and
4% cyclical unemployment rate. Draw the long run Phillips curve. Mark all axes.
9
Page 10
NAME:
RI’s NAME:
3. Components & meaning of the GDP.
In 2005, the expenditures in Whartown were as follows:
$ Billions
Durable Goods
500
Nonresidential Investment
300
Federal Purchase of Goods
400
Exports
300
State and Local Purchases of Goods
150
Residential Investment
100
Services
700
Imports
200
Change in Business Inventories
-50
Nondurable Goods
700
a.
(5 points) Using the above figures, compute the subtotals for each of the four major spending
categories, and write the total GDP.
b. (5 points) Describe three factors that affect social welfare but which GDP does not measure.
10
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NAME:
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4. (5 points) Interpreting the media.
In one or two sentences, interpret the following quoting from Bloomberg news: “Fed’s Recovery Forecast
Buoyed by Dudley Expecting Dollar-Driven Exports”
(Hint 1: Dudley is the Federal Reserve Bank Of New York President)
(Hint 2: Definition “buoy”: cause to become cheerful or confident)
11
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12
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NAME:
RI’s NAME:
Part 4: Problems (30 points)
Problem 1 (13 points): Calculating growth rate and inflation.
Assume the economy produces only two goods, X and Y. In this economy, Year 1 is the base year.
Production
Prices
Year 1
Year 2
Year 3
Year 1
Year 2
Year 3
Good X
100
200
200
$1.00
$1.50
$2.00
Good Y
110
100
150
$2.00
$2.00
$4.00
a. (3 points) What is the nominal GDP in Year 3?
b. (5 points) Calculate the growth rate in the economy between Year 1 and 2.
13
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