Final_F02

Final_F02 - Econ-2 Fall 2002 FINAL EXAM Answer Key Part I...

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1 Econ-2 Fall 2002 FINAL EXAM –Answer Key Part I – Multiple Choice Questions (75 points) Version A Version B Version C 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. B C B B C D D B B A A A D E A A D B B B D D A A D B C B A C A D C C B B B C D C C C B B C C A C C B 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. D A D D C B D C B D C A A D C D A C B C A A A A C B A B D B A C C B A C B B C D D D C C B B C C B D 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. B A C C D B B D D A B C A C B B B B C C A C C A B B C B C C D B A D B D C B B A C E D B A A A C D D
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2 Part II. Definitions (10 points, 2.5 points each) 1. Economics: the study of how to efficiently utilize scarce resources to satisfy unlimited wants. 2. Fallacy of Composition: what is true for one individual or part of a whole is necessarily true for a group of individuals or the whole. 3. Exchange Rate: rate at which a currency of one nation can be exchanged for the currency of another nation. 4. Liquidity Trap: situation when the interest rate is so low that a change in money supply has no impact over the interest rate of equilibrium. Under these conditions, MP is ineffective. Part III. Short Essays (15 points, 5 points each) 1. A) The major causes of shifts in investment demand are: - Acquisition, maintenance, and operating costs: the initial cost of capital goods and the estimated costs of operating those goods affect the expected rate of return on investment. When cost fall (rise), the expected rate of return from investment rises (fall) and investment demand curve shifts to the right (left). - Business taxes: since businesses look to expected returns after taxes in making their investment decisions, an increase (reduction) in business taxes lowers (increases) the expected profitability of investments and shifts the investment demand to the left (right). -
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Final_F02 - Econ-2 Fall 2002 FINAL EXAM Answer Key Part I...

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