ECO 300 QUIZZES #1-5, SPRING 2004 (through mid-March)

Answers are at bottom of document.

Quiz #1 / Thurs., Feb. 5, 2004

2. What is an aggregate?

3. An economic model is a formal statement of an economic __________.

4. Natural real GDP is the highest level of real GDP that won't cause an accelerating rate of _________________.

5. __________________ is defined as average output per hour worked.

1. The fluctuations in real GDP around its long-term growth trend are called the ____________ cycle.

2. The type of extreme inflation in which the price level is increasing by more than 50% per month is called ____________________.

3. GDP, by the product/expenditure approach, = ___+___+___+___-___

4. The largest component of GDP, using the income approach, is ______________________.

5. In 1903 sugar was only 4 cents a pound; therefore, it was cheap. Why might an economist disagree with that logic?

1. GDP is a __________ variable. [stock / flow]

2. If the government deficit and net exports are both zero, then household saving (S) equals ___________________.

3. In the equation C = 300 + 0.75Y_d , 0.75 is the MPC, or _______________________________________________ [4 words].

4. The total increase in real GDP (Y) caused by a $1 increase in autonomous spending is called the _______________________.

5. An _____________________ variable is one that is explained by the economic model at hand.

6. (Extra credit) Alan Greenspan said this week that the growth of two large financial institutions threatens the economy. Name them.

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2. Another such leakage is ____________________________________________. [ditto]

3. In the multiplier model the economy is in disequilibrium when aggregate _____________ is not equal to real GDP.

4. In the multiplier model an economy in disequilibrium moves toward equilibrium through a step-by-step adjustment in ___________________. [hint: begins with "i"]

5. In the multiplier model, an equal increase in government purchases (G) and lump-sum taxes (T) causes real GDP to increase by the same amount. Why does real GDP increase at all in this scenario?

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SOLUTIONS TO QUIZZES #1-5

1. macroeconomics
2. a total (a macroeconomic aggregate is a variable for the economy as a whole, like GDP)
3. theory
4. inflation
5. productivity

1. business
2. hyperinflation
3. C+I+G+EX-IM; or, C+I+G+NX
4. wages and salaries
5. You need to adjust for inflation. How much would that 4 cents be in today's prices? Would it be more than a pound of sugar costs now? Also, how expensive was sugar in relation to the average person's wage, in 1903 compared with now?

Quiz 3 --

Quiz 4

1. flow
2. investment (I)
3. marginal propensity to consume
4. multiplier
5. endogenous
6. Fannie Mae and Freddie Mac, the semi-public mortgage giants

1. marginal propensity to import
2. income tax; also acceptable (though not leakages exactly) were [a] interest rates and crowding out and [b] partial price flexibility
3. demand
4. inventories
5. Because some of the tax increase would have been saved, not consumed, and therefore would not contribute to aggregate demand (AD), whereas all of the increase in government purchases contributes to AD. That makes for a net increase in AD and Y.