Oldfinal - Name: _ Class: _ Date: _ ID: A Final Exam 224...

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Name: ________________________ Class: ___________________ Date: __________ ID: A 1 Final Exam 224 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. Consider the following market for loanable funds, suppose that the initial supply for loanable funds is Supply-1. Analyze the effect on this market of the government decreasing taxes by $300 billion with no accompanying change in spending. Supply-1 Demand Loanable Funds 2000 0.05 Supply-3 2300 Quantity (in billions) 2100 0.04 r 1800 1600 Supply-2 0.06 0.03 Supply-4 ____ 1. What is the new equilibrium interest rate? a. 3 percent c. 5 percent b. 4 percent d. 6 percent ____ 2. How much does private savings change by? a. Decreases by $300 billion c. Increases by $100 billion b. Decreases by $200 billion d. Increases by $200 billion ____ 3. How much private investment is crowded out? a. $300 billion c. $100 billion b. $200 billion d. zero
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Name: ________________________ ID: A 2 Suppose that the market for loanable funds is depicted as below. Initially, the supply is Supply-1 and demand is Demand-1. Use this to answer the following questions. billions of dollars 1.0% 7.5% 5.0% 2.5% 500 550 600 800 1000 10.0% 1200 1400 Demand-2 Demand-1 Demand-3 Supply- 2 Supply-1 ____ 4. Suppose that the government passed new tax breaks for business investment, which of the following is most likely to represent its effect a. Demand shifts to demand-3 c. Supply shifts to supply-2 b. Demand shifts to demand-2 d. Nothing changes, only a movement along the curve.
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Name: ________________________ ID: A 3 Suppose the picture below depicts the market for loanable funds. Initially, supply is Supply-1. quantity in 100s of billions 3 Demand interest rate in % 10 9 8 7 6 5 4 3 2 1 Supply-1 1 2 4 5 6 7 Supply-2 Supply-3 Supply-4 ____ 5. If the government decreases spending by $100 billion, which accurately describes the effect of this policy change? a. Supply shifts to Supply-2 c. Supply shifts to Supply-4 b. Supply shifts to Supply-3 d. Nothing happens since Demand is horizontal ____ 6. If the government decreases taxes by $150 billion, what happens to investment? a. investment rises by $150 billion c. investment falls by $150 billion b. investment rises by more than $200 billion because of the multiplier effect d. No change in investment.
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Name: ________________________ ID: A 4 The picture below depicts the AD-AS model. Currently AD is AD-1 and SRAS is SRAS-1. LRAS SRAS-1 AD-1 AD-2 AD-3 AD-4 135 115 110 105 100 95 10.5 11.0 11.5 12.0 SRAS-2 SRAS-3 ____ 7. Suppose that the demand for money increases, which is most likely an accurate representation of that effect on the AD-AS model in the short-run?
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This note was uploaded on 06/07/2011 for the course ECON 224 taught by Professor Ozturk during the Spring '09 term at South Carolina.

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Oldfinal - Name: _ Class: _ Date: _ ID: A Final Exam 224...

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