ECON 4000      November 25, 1997 

1.     The population of the world is about _________________________________________.

2.     Whose picture is on the $10 bill _____________________________________________.

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

1.     Why is consumption an important topic in macroeconomics?  Why is there not just one consumption theory?  What is the significance of having several consumption theories?

2.     Why does investment tend to be volatile?  How can the accelerator or capital-to-output ratio be used to explain investment fluctuations?

3.     What does it mean to say a country has a fixed exchange rate system?  What are the policy implications of such a system?

4.     Given the following data what are the equations of consumption and investment?  What is the multiplier?  What are the equilibrium levels of income/consumption and investment?  How are the aggregate demand-aggregate supply and savings-investment approaches to determining the equilibrium level of income.

                                Y                        C                        I                        G

                            250                    175                    75                      400

                            375                    225                    100                    400

                            500                    275                    125                    400

                            625                    325                    150                    400

                            750                    375                    175                    400

                            875                    425                    200                    400

                           1000                   475                    225                    400

                           1125                   525                    250                    400

                           1250                   575                    275                    400

                           1375                    625                   300                    400

5.     Monetarists and Keynesians have very different views of the economy.  What are their key differences in interpretation?  Why is it often said that these are empirical questions?  Are these issues likely to be resolved soon?

6.     What is the most you would pay for a machine that yields output at $1800 per year for four years when interest rates are 8% and costs in each of the four years are respectively zero, $100, 150, and 300.  What concept of economic theory does this problem illustrate?  Explain.