ECN 211 EXAM FINAL PAPER 2026 COMPLETE
QUESTIONS AND ANSWERS
◉ A budget surplus occurs when what happens. Answer: Tax
revenue exceeds government expenditures.
◉ What is the primary driver of economic growth?. Answer:
Productivity
◉ What is a measure of productivity. Answer: Real GDP per worker
◉ T/F: Over the past 100 years, all economies have grown at roughly
the same rate.. Answer: FALSE
◉ What would most likely lead to a decrease in the quantity of
capital per worker in the long-run?. Answer: A decrease in the share
of income saved by households.
◉ Suppose the amount of capital per worker in an economy
increases. As a result, what would happen?. Answer: Productivity
grows at a decreasing rate.
,◉ What are two strategies to promote economic growth?. Answer: 1.
Promote free trade
2. Enforce private property rights
◉ What causes frictional unemployment (according to Mankiw)?.
Answer: Job search time
◉ What best describes the labor force?. Answer: All civilian non-
institutionalized individuals 16 and over who are employed or
unemployed.
◉ What causes structural unemployment?. Answer: Minumum
wages
◉ What is Fiat money?. Answer: Money made valuable by law.
◉ What asset is the most liquid?. Answer: A checking account
deposit
◉ What is NOT considered money in the United States?. Answer: A
share of Apple stock
◉ What percent do banks hold of the total deposits in reserve?.
Answer: Less than one hundred percent
,◉ When banks make loans with excess reserves, what happens to
the money supply?. Answer: It increases
◉ What entities deposit funds at the Federal Reserve?. Answer:
Commercial banks.
◉ What is not a tool of monetary policy?. Answer: Capital
requirements
◉ What is Open Market Operations?. Answer: The purchase and sale
of securities by the Federal Reserve
◉ What would lead to an increase in the money supply?. Answer:
The Fed purchases securities from dealer banks.
◉ According to the classical dichotomy in the long-run.... Answer:
Real GDP and price level are determined separately.
◉ According to the classical theory of inflation, what causes high
rates of inflation?. Answer: Excessive money growth.
◉ Averaged over a long period of time, what happens?. Answer:
Velocity is fairly stable.
, ◉ Aggregate demand is best interpreted as what?. Answer:
Expenditure components of GDP
◉ T/F: As real GDP declines, unemployment rises.. Answer: TRUE
◉ T/F: When consumption declines during recessions, investment
usually increases.. Answer: FALSE
◉ All are determinants of long-run aggregate supply except for
what?. Answer: The interest rate
◉ Why does the short-run aggregate supply curve slope upward?.
Answer: Wages and input prices are fixed in the short-run.
◉ T/F: In the short-run, real GDP is always equal to the natural level
of output.. Answer: FALSE
◉ The National Industrial Readjustment Act limited competition,
"set" prices, and reduced agricultural output. This likely caused
what?. Answer: A decrease in aggregate supply.
◉ The high tariffs of the 1920s caused what?. Answer: Aggregate
demand decreased.
QUESTIONS AND ANSWERS
◉ A budget surplus occurs when what happens. Answer: Tax
revenue exceeds government expenditures.
◉ What is the primary driver of economic growth?. Answer:
Productivity
◉ What is a measure of productivity. Answer: Real GDP per worker
◉ T/F: Over the past 100 years, all economies have grown at roughly
the same rate.. Answer: FALSE
◉ What would most likely lead to a decrease in the quantity of
capital per worker in the long-run?. Answer: A decrease in the share
of income saved by households.
◉ Suppose the amount of capital per worker in an economy
increases. As a result, what would happen?. Answer: Productivity
grows at a decreasing rate.
,◉ What are two strategies to promote economic growth?. Answer: 1.
Promote free trade
2. Enforce private property rights
◉ What causes frictional unemployment (according to Mankiw)?.
Answer: Job search time
◉ What best describes the labor force?. Answer: All civilian non-
institutionalized individuals 16 and over who are employed or
unemployed.
◉ What causes structural unemployment?. Answer: Minumum
wages
◉ What is Fiat money?. Answer: Money made valuable by law.
◉ What asset is the most liquid?. Answer: A checking account
deposit
◉ What is NOT considered money in the United States?. Answer: A
share of Apple stock
◉ What percent do banks hold of the total deposits in reserve?.
Answer: Less than one hundred percent
,◉ When banks make loans with excess reserves, what happens to
the money supply?. Answer: It increases
◉ What entities deposit funds at the Federal Reserve?. Answer:
Commercial banks.
◉ What is not a tool of monetary policy?. Answer: Capital
requirements
◉ What is Open Market Operations?. Answer: The purchase and sale
of securities by the Federal Reserve
◉ What would lead to an increase in the money supply?. Answer:
The Fed purchases securities from dealer banks.
◉ According to the classical dichotomy in the long-run.... Answer:
Real GDP and price level are determined separately.
◉ According to the classical theory of inflation, what causes high
rates of inflation?. Answer: Excessive money growth.
◉ Averaged over a long period of time, what happens?. Answer:
Velocity is fairly stable.
, ◉ Aggregate demand is best interpreted as what?. Answer:
Expenditure components of GDP
◉ T/F: As real GDP declines, unemployment rises.. Answer: TRUE
◉ T/F: When consumption declines during recessions, investment
usually increases.. Answer: FALSE
◉ All are determinants of long-run aggregate supply except for
what?. Answer: The interest rate
◉ Why does the short-run aggregate supply curve slope upward?.
Answer: Wages and input prices are fixed in the short-run.
◉ T/F: In the short-run, real GDP is always equal to the natural level
of output.. Answer: FALSE
◉ The National Industrial Readjustment Act limited competition,
"set" prices, and reduced agricultural output. This likely caused
what?. Answer: A decrease in aggregate supply.
◉ The high tariffs of the 1920s caused what?. Answer: Aggregate
demand decreased.
