ECON 2500                                                    Name: ______________________________

EXAM #1                                                        October 20, 1994

1.    OPEC is the abbreviation for ______________________________________.

2.    COLA is the abbreviation for _____________________________________.

3.    The monetary unit in Hungry is the _______________________________.

Answer four (4) of the following six (6) questions:

1.    What is meant by the law of demand?  What are the basic determinants of market demand?  How do the concepts of diminishing marginal utility, income effect and substitution effect relate to the concept of demand?

2.    What is the production possibilities curve?  What concepts can be explained and illustrated using this concept?

3.    what is meant by spillovers or externalities?  How can they be dealt with?

4.    What does full-employment unemployment rate mean?  Why is it difficult to distinguish between cyclical, frictional and structural unemployment?  What are the consequences of unemployment?

5.    What are the basic determinants of investment?  Explain the relationship between the real interest rate and the level of investment.  Why is the investment schedule less stable than the consumption of and saving schedules?

6.    Explain the classical economists' conclusion that say's law would prevail even in an economy where substantial saving occurred.  What arguments have Keynesian economists used in attacking the classical view that Say's law would result in sustained full-employment?