ECN 211 LATEST 2026 EXAM QUESTIONS AND SOLUTIONS
GRADED A+
✔✔Real GDP - ✔✔Adjusted for the change in dollar value and corrected for inflation.
✔✔Unemployed - ✔✔Those who are not working, were available to work, tried
searching for jobs in the past 4 weeks, or waiting to be called back to a job in which they
were laid off from.
✔✔CPI - ✔✔Measures the consumer's cost of living.
✔✔Nominal wage - ✔✔Number of dollars you earn.
✔✔Real wage - ✔✔Purchasing power of your wage.
✔✔Nominal interest rate - ✔✔Annual percent increase in dollars earned from making a
loan.
✔✔Real interest rate - ✔✔Annual percent increase in lender's purchasing power from
making a loan.
✔✔Purchasing power - ✔✔When there's inflation which increases the price level
decreases purchasing power.
✔✔What can inflation do? - ✔✔It can redistribute purchasing power from one group to
another.
✔✔How does inflation shift purchasing power? - ✔✔It shifts purchasing power away
from those who are awaiting payment and towards those who have to make those
payments.
✔✔Productivity - ✔✔The average quantity of goods and services produced per unit of
labor input.
✔✔Production function - ✔✔Y=A X F(L,K,H,N)
✔✔What is one way to boost productivity? - ✔✔By increasing K (capital stock) which
requires investment.
✔✔What is the effect of producing more capital goods? - ✔✔It reduces the production
of current consumption of goods; increase in saving means a decrease in consumption
hence a trade off between current and future consumption.
, ✔✔How much does a worker's wages increase for each year of schooling? And what
trade off does it have? - ✔✔It increases by 10%. It has a trade off between the present
and future. Spending a year in year requires sacrificing a year's wages now for higher
wages in the future.
✔✔What are some policies to promote technological progress? - ✔✔- Patent laws
- Tax incentives
- Grants
✔✔How does population affect living standards? - ✔✔- Stretching natural resources
- Diluting capital stock
- Technological progress
✔✔Private saving - ✔✔The income remaining after households have paid their taxes
and consumption.
✔✔Investment - ✔✔Purchase of new capital.
✔✔What does the market of loanable funds helps us understand? - ✔✔It helps us
understand how financial markets coordinates saving and investment and how
government policies and other factors affect saving, investment, and interest rate.
✔✔What happens to the quantity of loanable funds supplied when interest rate goes
up? - ✔✔It makes saving more attractive which means quantity of loanable funds
supplied will increase.
✔✔What happens when the interest rate falls? - ✔✔Investment spending rises and
business borrowing rises.
✔✔What is money? - ✔✔- Widely accepted means of payment
- Most liquid asset
- Solves double coincidence of wants
- Eliminates the need for barter
✔✔What is part of the money supply? - ✔✔- Currency
- Demand deposits
✔✔What are the functions of the FED? - ✔✔- Supervising and regulating banks
- Acting as a bank for banks
- Issuing paper currency
- Check clearing
- Guiding the macroeconomy
- Dealing with financial crisis
GRADED A+
✔✔Real GDP - ✔✔Adjusted for the change in dollar value and corrected for inflation.
✔✔Unemployed - ✔✔Those who are not working, were available to work, tried
searching for jobs in the past 4 weeks, or waiting to be called back to a job in which they
were laid off from.
✔✔CPI - ✔✔Measures the consumer's cost of living.
✔✔Nominal wage - ✔✔Number of dollars you earn.
✔✔Real wage - ✔✔Purchasing power of your wage.
✔✔Nominal interest rate - ✔✔Annual percent increase in dollars earned from making a
loan.
✔✔Real interest rate - ✔✔Annual percent increase in lender's purchasing power from
making a loan.
✔✔Purchasing power - ✔✔When there's inflation which increases the price level
decreases purchasing power.
✔✔What can inflation do? - ✔✔It can redistribute purchasing power from one group to
another.
✔✔How does inflation shift purchasing power? - ✔✔It shifts purchasing power away
from those who are awaiting payment and towards those who have to make those
payments.
✔✔Productivity - ✔✔The average quantity of goods and services produced per unit of
labor input.
✔✔Production function - ✔✔Y=A X F(L,K,H,N)
✔✔What is one way to boost productivity? - ✔✔By increasing K (capital stock) which
requires investment.
✔✔What is the effect of producing more capital goods? - ✔✔It reduces the production
of current consumption of goods; increase in saving means a decrease in consumption
hence a trade off between current and future consumption.
, ✔✔How much does a worker's wages increase for each year of schooling? And what
trade off does it have? - ✔✔It increases by 10%. It has a trade off between the present
and future. Spending a year in year requires sacrificing a year's wages now for higher
wages in the future.
✔✔What are some policies to promote technological progress? - ✔✔- Patent laws
- Tax incentives
- Grants
✔✔How does population affect living standards? - ✔✔- Stretching natural resources
- Diluting capital stock
- Technological progress
✔✔Private saving - ✔✔The income remaining after households have paid their taxes
and consumption.
✔✔Investment - ✔✔Purchase of new capital.
✔✔What does the market of loanable funds helps us understand? - ✔✔It helps us
understand how financial markets coordinates saving and investment and how
government policies and other factors affect saving, investment, and interest rate.
✔✔What happens to the quantity of loanable funds supplied when interest rate goes
up? - ✔✔It makes saving more attractive which means quantity of loanable funds
supplied will increase.
✔✔What happens when the interest rate falls? - ✔✔Investment spending rises and
business borrowing rises.
✔✔What is money? - ✔✔- Widely accepted means of payment
- Most liquid asset
- Solves double coincidence of wants
- Eliminates the need for barter
✔✔What is part of the money supply? - ✔✔- Currency
- Demand deposits
✔✔What are the functions of the FED? - ✔✔- Supervising and regulating banks
- Acting as a bank for banks
- Issuing paper currency
- Check clearing
- Guiding the macroeconomy
- Dealing with financial crisis
