ECO 201 Exam 2 Questions and
Answers 100% Pass
For a middle tax rate country, tax decreases typically have what effects on an economy?
- ✔✔economic growth stays about the same over the long-run and economic growth
speeds up over the short-run
Suppose financial markets initially expected annual inflation to be 4% per year.
However a year later, annual inflation actually turned out to be 1%. Because of this
unexpected level of inflation - ✔✔employers are hurt and employees are helped
Suppose firms now estimate smaller productivity gains on their capital investments
than they had previously estimated. Other things equal, this tends to cause the quantity
of loanable funds exchanged to decrease. (T or F) - ✔✔TRUE
Suppose firms now estimate smaller productivity gains on their capital investments
than they had previously estimated. Other things equal, this tends to cause the long-
term real interest rate to increase. (T or F) - ✔✔FALSE
Suppose there is an increased willingness by corporations to borrow. This causes... -
✔✔the real interest rate to rise and the quantity of loanable funds exchanged to rise
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
Answers 100% Pass
For a middle tax rate country, tax decreases typically have what effects on an economy?
- ✔✔economic growth stays about the same over the long-run and economic growth
speeds up over the short-run
Suppose financial markets initially expected annual inflation to be 4% per year.
However a year later, annual inflation actually turned out to be 1%. Because of this
unexpected level of inflation - ✔✔employers are hurt and employees are helped
Suppose firms now estimate smaller productivity gains on their capital investments
than they had previously estimated. Other things equal, this tends to cause the quantity
of loanable funds exchanged to decrease. (T or F) - ✔✔TRUE
Suppose firms now estimate smaller productivity gains on their capital investments
than they had previously estimated. Other things equal, this tends to cause the long-
term real interest rate to increase. (T or F) - ✔✔FALSE
Suppose there is an increased willingness by corporations to borrow. This causes... -
✔✔the real interest rate to rise and the quantity of loanable funds exchanged to rise
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
