WPR 2 Version 1 Solution

# WPR 2 Version 1 Solution - Department of Social Sciences...

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Department of Social Sciences United States Military Academy West Point, New York 10996 SS201/SS251 Economics, Term 06-02 Cadet ID # _______________ WPR #2, Version 1 Section______ 150 Points You have a total of 55 minutes to complete this WPR. Please ensure you have a complete WPR. The WPR consists of this cover sheet plus 5 pages of questions. Question Topic Points Score 1 Multiple Choice Online in Aplia 45 2 Concepts 25 3 Fiscal Policy 35 4 Monetary Policy 20 5 Inflation/ Unemployment 25 Total 150 Grade __________% Letter Grade: __________

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Cadet ID #:________ Section_____ SS201/251 Principles of Economics WPR 2 (150 pts; 55 min) 2. (25 Points) CONCEPT QUESTIONS a. (5) An economy has 400 million people and half of them are in the labor force. The unemployment rate is 5%. How many people are unemployed (in millions)? LF = 200 m 5% (200m)= 10 m (ans) b. (5) Which classical economic theory is illustrated through the perfect ineleasticity of the LRAS curve? Money Neutrality c. (5) Define the theory identified in part B, and explain why it occurs in one timeframe, but not the other. Money Neutrality= Inflation doe not affect real variables. It holds in the LR but not the SR, because in the SR there are Sticky wages, Sticky Prices and Misperceptions. d. (5) Why does the SRAS curve slope up? List three reasons. Sticky wages, Sticky Prices and Misperceptions. e. (5) Your grandmother has \$12,000 in her mattress. You convince her to put it in the bank so that it will grow through the magic of compounded interest. Another benefit is that it will increase the money supply. Assuming a 10% reserve ratio at her bank, how much will her
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## This test prep was uploaded on 04/17/2008 for the course ECON SS201 taught by Professor Evans during the Spring '08 term at West Point.

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WPR 2 Version 1 Solution - Department of Social Sciences...

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