Econ103 - into play when price is either above or below its...

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Midterm Exam for Economics 103 March 18, 2010 Professor Fred Gottheil 1. (a) Show the relationship between real and nominal GDP. (b) what arguments do real cycle theorists offer to explain why “business cycles” are not really cycles at all. 2. Explain why is saving always equal to actual investment 3. How does the government close a recessionary gap? 4. Explain the difference between an income multiplier and a tax multiplier. 5. Suppose equilibrium Y = $1.0 trillion, full-employment Y = $1.4 trillion, and MPC = 0.8. If you want to achieve a full employment level of Y and don’t worry about running deficit budgets, what would you do and why. If you want to keep the budget balanced and still get to full employment Y, what must you do and why. 6. Draw a graph depicting a shoe market in equilibrium. Explain what happens if price were not at equilibrium. In other words, what forces come
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Unformatted text preview: into play when price is either above or below its equilibrium level? 7. Using the AD/AS model, (i) explain what could shift the aggregate demand outward and (ii) explain how demand-pull inflation can occur. 8. Using the capital deepening model, explain how long-run economic growth occurs. 9. What is the accelerator and what role does it play in explaining business cycles? 10. Explain the difference between expectations and speculation and using that difference, show how economic bubbles may occur. 11. Define and explain: age of enlightenment, absolute income hypothesis, relative income hypothesis, structural unemployment, underemployment. 12. List the component parts of national income. Using the expenditure approach, list the component parts of GDP....
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This note was uploaded on 09/30/2010 for the course ECON 33328 taught by Professor Petry during the Fall '10 term at University of Illinois at Urbana–Champaign.

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