ECON 4000                        Name_____________

Exam #2                        November 21, 2000

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

 1.      What does a balanced federal budget mean and what are its implications?

 2.      What a macromodel includes G, T, X and M, what are the conditions for establishing equilibrium and why?

 3.      What is the Phillips Curve and what is its significance to explaining how the economy works.

 4.      What is meant by accelerator and how is it a part of investment theory?  How does it help explain investment and behavior of the economy?

 5.      What is the permanent income hypothesis, the absolute income hypothesis and the relative income hypothesis?

 6.   Where Y = C + I + G + X - M and

      C = 100  +  .68 (y - t)

      I = 150 + .14

      T = .254

      G = 400

      X = 14

      M = .054

      Find Y, C, I and M.  What can you say about the government budget and the balance of payments?