ECON 5050 Practice Final Fall 1997

Use separate sheets of paper as needed to answer. Please be sure to put your name on your answer sheets and the part of the exam you are answering and the number of the question you are answering. When done staple all your answer sheets and your exam together and hand them in.

Part I (15 points): Using separate diagrams for each of the following, with supply and demand clearly labeled, please depict the effect on the equilibrium price and quantity of the good that will be produced and sold.

1. The effect of an increase in incomes on the market for premium wines.

2. The effect of a decrease in the cost of beer nuts on the pretzel market.

3. The effect of an increase in the cost of cocoa beans on the market for chocolate.

4. The effect of a decrease in the price of CD players on the market for cds.

5. The effect of an improvement in production technology on the market for shoes.

Part II (14 points): Please explain the following briefly:

1. What are some of the generally accepted economic goals for an economy ? If these goals are generally accepted why are there still disagreements between economists?

2. What’s comparative advantage? How does this relate to trade?

3. What determines who really bears the greater portion of the burden of a sales tax on a good?

4. What’s the difference between a public good and a publicly provided good?

5. Who benefits from inflation? Who benefits from deflation?

6. Explain the relationships between the numbers in the table below and fill in the missing entry:
 
Year
Nominal GDP billions $ 
Real GDP in 1987 billions $
GDP Deflator (1987 base)
1948
260
1300
20.0
1988
4900
103.9
1994
6337
5342
118.6

7. What are the major policy tools of the Fed?

Part III (1 point):

1. Who is the current chairman of the Federal Reserve Board?

Part IV (70 points): Please explain the following:

1. What’s the difference between elasticity of demand (also called price elasticity), income elasticity, cross price elasticity and supply elasticity?

2. Compare and contrast monopolistically competitive firms with perfectly competitive firms and monopolies.

3. Discuss some of the key antitrust legislation that has been passed.

4. What are the different types of unemployment, discuss their relative importance and alternative policies that might be undertaken to try to reduce each.

5. Using the business cycle model and the AD - AS model explain under which circumstances many economists would advocate a deficit and under which circumstances they would be likely to oppose a deficit. Be sure to include the concept of automatic stabilizers in your discussion

6. Compare and contrast Keynesianism with monetarism and rational expectations theory.

7. Discuss the advantages and disadvantages of tarriffs versus quotas.