Ec 302 Final Exam Questions And Answers

EC 302 FINAL EXAM QUESTIONS
AND ANSWERS
.q9Anq9increaseq9inq9theq9marginalq9propensityq9toq9consumeq9will:q9

a.q9Leadq9toq9theq9consumptionq9functionq9becomingq9steeper
b.q9Shiftq9theq9consumptionq9functionq9upwards
c.q9Shiftq9theq9consumptionq9functionq9downwards
d.q9Shiftq9theq9savingsq9functionq9upwardsq9-q9ANSWERS--
a.q9Leadq9toq9theq9consumptionq9functionq9becomingq9steeper

Whichq9ofq9theq9followingq9areq9characteristicq9ofq9Friedman'sq9'Permanentq9Incomeq9Hy
pothesis'?q9

i)q9Theq9mainq9influenceq9onq9long-runq9consumptionq9isq9someq9formq9ofq9long-
runq9averageq9income
ii)q9Consumptionq9willq9tendq9toq9beq9aq9constantq9proportionq9ofq9long-
runq9averageq9incomeq9(permanentq9income)

a.q9Onlyq9(i)q9isq9correct
b.q9Onlyq9(ii)q9isq9correct
c.q9Bothq9(i)q9andq9(ii)q9areq9correct
d.q9Allq9areq9falseq9-q9ANSWERS--c.q9Bothq9(i)q9andq9(ii)q9areq9correct

Ifq9inflationq9rateq9inq9periodq9tq9isq9givenq9asq90.04q9andq9consumerq9priceq9indexq9inq9peri
odq9t+1q9isq9100q9thenq9CPIq9inq9periodq9tq9isq9givenq9by:

a.q9104
b.q996
c.q998
d.q996.15q9-q9ANSWERS--d.q996.15

.q9Atq9theq9optimalq9levelq9ofq9investment,q9whichq9ofq9theq9followingq9relationq9holds:

a.q9P*F'(K)q9=q9Pk(r-)
b.q9P*F'(K)q9=q9Pk(r+)
c.q9P*F'(K)q9=q9Pk(R-)
d.q9P*F'(K)q9=q9Pk(R+)q9-q9ANSWERS--b.q9P*F'(K)q9=q9Pk(r+)

Inq9theq9Modiglianiq9Life-
Cycleq9Theory,q9ifq9theq9numberq9ofq9yearsq9toq9retirementq9decreases,q9lifeq9resourcesq9
willq9______q9andq9currentq9consumptionq9willq9________.
q9a.q9Increase;q9Decrease.

q9b.q9Increase;q9Increase.

c.q9Decrease;q9Increase.
d.q9Decrease;q9Decrease.q9-q9ANSWERS--d.q9Decrease;q9Decrease.

, Ifq9theq9Keynesianq9consumptionq9functionq9isq9givenq9byq9Cq9=q9150q9+q90.60Y,q9andq9Yq9i
ncreasesq9byq91q9unit,q9thenq9savings;
a.q9Increasesq9byq90.60q9unit.
b.q9Increasesq9byq90.40q9unit.
c.q9Decreasesq9byq90.60q9unit.
d.q9Decreasesq9byq90.40q9unit.q9-q9ANSWERS--b.q9Increasesq9byq90.40q9unit.

Ifq9aq9pizzaq9Econlandq9hasq9aq9populationq9ofq960q9peopleq9withq940q9ofq9themq9workingq9
producingq9aq9total
outputq9ofq9$600,000.q9Theq9standardq9ofq9livingq9ofq9Econlandq9equalsq9_____q9whileq9av
erageq9labor
productivityq9equalsq9_____.
a.q9$6,000;q9$15,000
b.q9$6,000;q9$10,000
c.q9$10,000;q9$10,000
d.q9$10,000;q9$15,000q9-q9ANSWERS--d.q9$10,000;q9$15,000

.q9Ifq9nominalq9GDPq9isq9$15q9trillionq9andq9realq9GDPq9isq9$12q9trillion,q9thenq9GDPq9deflat
orq9isq9givenq9by
a.q9125,q9andq9thisq9indicatesq9thatq9theq9priceq9levelq9hasq9increasedq925%q9sinceq9theq9b
aseq9year
b.q9125,q9andq9thisq9indicatesq9thatq9theq9priceq9levelq9hasq9increasedq91.25%q9sinceq9theq9
baseq9year
c.q980,q9andq9thisq9indicatesq9thatq9theq9priceq9levelq9hasq9increasedq920%q9sinceq9theq9ba
seq9year
d.q980,q9andq9thisq9indicatesq9thatq9theq9priceq9levelq9hasq9decreasedq920%q9sinceq9theq9ba
seq9yearq9-q9ANSWERS--
a.q9125,q9andq9thisq9indicatesq9thatq9theq9priceq9levelq9hasq9increasedq925%q9sinceq9theq9b
aseq9year

Michiganq9beganq9indexingq9itsq9minimumq9wageq9toq9inflationq9inq92010.q9Consequently,
q9whenq9the

inflationq9rateq9isq95%,q9minimumq9wageq9earnersq9inq9Michiganq9whoq9areq9ableq9toq9stayq
9employedq9can

expectq9_____.
a.q9Aq9realq9wageq9decreaseq9ofq95%
b.q9Aq9nominalq9wageq9decreaseq9ofq95%
c.q9Aq9nominalq9wageq9increaseq9ofq95%
d.q9Aq9constantq9nominalq9wageq9-q9ANSWERS--c.q9Aq9nominalq9wageq9increaseq9ofq95%

.q9Supposeq9thatq9theq9baseq9yearq9forq9CPIq9isq92014.q9Theq9costq9ofq9theq9CPIq9basketq9in
q92014q9isq9$50;q9theq9costq9ofq9theq9basketq9inq92015q9wasq9$60,q9andq9theq9costq9ofq9theq9

basketq9inq92016q9wasq9$66.q9Whatq9wasq9theq9CPIq9inq92015?
a.q960
b.q9120
c.q920%
d.q9100q9-q9ANSWERS--b.q9120

Accordingq9toq9theq9quantityq9theoryq9ofq9money,q9whatq9isq9theq9effectq9ofq9anq9increaseq9i
nq9theq9quantityq9ofq9money?