Econ Assignment

Livingstone College

Principles of Economics

ECON-231

Final Exam Fall 2021

Student Name: Ja’Niya Ladson

ID: 172000

Exam date: March 2, 2022

Instructor Signature:

Note: Each question carries 5 points.

1. When the federal government uses taxation and spending actions to stimulate the economy it is conducting:  a. Fiscal policy b. Incomes policy c. Monetary policy d. Employment policy

2. Fiscal policy is enacted through changes in:  a. Interest rates and the price level b. The supply of money and foreign exchange c. Unemployment and inflation d. Taxation and government spending

3. When a consumer wants to compare the price of one product with another, money is primarily functioning as a:  a. Store of value b. Unit of account c. Checkable deposit d. Medium of exchange

4. What function is money serving when you deposit money in a savings account?  A. A store of value b. A unit of account c. A checkable deposit d. A medium of exchange

Money Market Mutual Funds held by individuals $ 200

Money Market Mutual Funds held by Business $ 220

Currency in circulation $ 70

Checkable Deposit $ 70

Savings Deposits, including Money Market Deposit Accounts $ 50

Large-denominated ($100,000 or more) time deposits $180

Small-denominated ($100,000 or more) time deposits $ 80

M0 and M1= coins and notes+ checkable deposit

M2 = M1 + short-term time deposits in banks + saving deposit in money market mutual funds (held by individual) + money market deposit account

M3 = M2 + longer-term time deposits and money market funds + saving deposit in money market mutual funds (held by business)

5. Refer to the above information. Money supply M1 for this economy is: Show Work a. $60. b. $70. c. $130. d. $140.

 6.a. Refer to the above information. Money supply M2 for this economy is: Show Work a. $480. b. $370.

c. $490. d. $360.

6.b. Refer to the above information. Money supply M3 for this economy is: Show Work a. $580. b. $770. c. $490,. d. $760

7. An Federal open market committee (FOMO) refers to:

(a) The purchase of goods and services by the Fed.

(b) An announcement about the level of the money supply in the economy.

(c) The process of printing more money and distributing it to the public.

(d) The purchase or sale of bonds to influence the level of the money supply in the economy.

8. To say money is socially defined means that:  A. money has been defined in a Constitutional amendment. B. whatever performs the functions of money extremely well is considered to be money. C. the money supply includes all public and private securities purchased by society. D. society, acting through Congress, specifies what shall be included in the money supply.

 9. Money functions as:  A. a store of value. B. a unit of account. C. a medium of exchange. D. all of these.

 10.a. If you are estimating your total expenses for school next semester, you are using money primarily as:  A. a medium of exchange. B. a store of value. C. a unit of account. D. an economic investment. 

10.b. If you place a part of your summer earnings in a savings account, you are using money primarily as a:  A. medium of exchange. B. store of value. C. unit of account. D. standard of value.

11. If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to:  A. save is three-fifths. B. consume is one-half. C. consume is three-fifths. D. consume is two-fifths.

 12. With an MPS of .4, the MPC will be:  A. 1.0 minus .4. B. .4 minus 1.0. C. the reciprocal of the MPS. D. .4.

 13. The period of declining growth in real GDP between the peak of the business cycle and the trough is called a:

a. recessionary phase.

b. recovery.

c. expansionary phase.

d. stationary phase.

14. Which of the following groups of people are members of the labor force?

a. People in prison.

b. Fulltime students.

c. People over 16 years of age who are employed.

d. Anyone not actively looking for work during the past 30 days.

15. Inflation is an increase in:

a. prices of all products in the economy.

b. homes, autos and basic resources.

c. the general price level of products.

d. none of the above.

16. The type of unemployment that occurs because of a recession is called:

a. frictional unemployment.

b. seasonal unemployment.

c. natural unemployment.

d. cyclical unemployment.

17. Consider an economy made up of 100 people, 50 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The unemployment rate is approximately:

a. 10 percent. b. 12 percent. c. 17 percent. d. 20 percent. e. 25 percent.

18. Suppose a market basket of goods and services costs $400 in the base year and the consumer price index (CPI) is currently 125. This indicates the price of the market basket of goods is now:

a. $275. b. $425. c. $500. d. $525.

	In Millions
Civilian population	100
People incapable of working	10
People not looking for work	10
Employed workers	70

19. Using the table above, the unemployment rate is: Show work a.    3 percent. b.    5 percent. c.    10 percent. d.    9 percent

20. A price index in years after  the base year: a.    Is never 100. b.    Is always greater than 100. c.    Is always less than 100. d.    Can be less than, greater than, or equal to 100

Essay Type Questions

1. What generally causes the business cycle? What are the four phases of a single business cycle? What are the problems associated with the business cycle?

The business cycle is caused by the forces of supply and demand—the movement of the gross domestic product GDP—the availability of capital, and expectations about the future. The four stages of the cycle are expansion, peak, contraction, and trough. Factors such as GDP, interest rates, total employment, and consumer spending, can help determine the current stage of the economic cycle. Insight into economic cycles can be very useful for businesses and investors.

 Section B

A hypothetical economy's consumption schedule is given in the table below. Show work

GDP=DI	C
660	668
680	684
700	700
720	716
740	732
760	748
780	764
800	780

Use the information to answer the following:

a. If disposable income were $740, how much would be saved? 732

b. What is the "break-even" level of disposable income?

c. What is this economy's marginal propensity to consume?

d. What is the average propensity to consume when disposable income is $700? When disposable income is $800?

2. The following table is a consumption schedule. Assume taxes and transfer payments are zero and that all saving is personal saving. Show work

(GDP = DI)	C	S	APC	APS
1500	$1540	$_____	1.027	–.027
1600	1620	_____	1.013	–.013
1700	1700	_____	_____	_____
1800	1780	_____	.989	.011
1900	1860	_____	.979	.021
2000	1940	_____	_____	_____
2100	2020	_____	.962	.038
2200	2100	_____	_____	_____

a. Compute saving at each of the eight levels of disposable income and the missing average propensities to consume and to save.

b. The break-even level of disposable income is $________.

c. As disposable income rises, the marginal propensity to consume remains constant. Between each two GDPs the MPC can be found by dividing $________ by $________, and is equal to _______.

d. The marginal propensity to save also remains constant when the GDP rises. Between each two GDPs the MPS is equal to $________ divided by $________, or to _______.

e. Plot the consumption schedule, the saving schedule, and the 45-degree line on the graph below.