Econ 2500                           Name: ____________________________________

Exam #2                             November 25, 1997

1. California is bordered by what states? ___________________________________

   __________________________________________________________________________.

2. The chairman of the Fed is _______________________________________________.

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

1. What is fiscal policy?  What is discretionary fiscal policy?  Is it effective?

2. Given the following what is the MPC, MPS, the multiplier, and the equilibrium level of income:    

                              Income                   Consumption

   Investment is constant at 40               100               120

                  200               200

                  300               280

                  400               360

                  500               440

                  600               520

                  700               600

3. How is the term money used?  What makes it difficult to measure the quantity of money?

4. What is meant by the money multiplier?  What may cause it to change?

5. What are open market operations?  Why are they so important to monetary policy?  How do they work?

6. What is the equation of exchange?  What does it show?  What issues can it be used to illustrate.