ECON 4000
November 18, 1993

1.   What does RSVP mean? _______________________________

2.   Normal human body temperature is ________.

3.   OPEC stands for ______________________________________.

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

1.   How do the multiplier and accelerator interact to cause economic fluctuations?  What are the limitations of the this cause of the business cycle?

2.   What do the following equations represent?

                        C  =  .8Y

                        C  =  50  +  9Y

      In each case what is the savings function?  What is the relationship between the average and marginal propensity to save?  Illustrate graphically your explanation.

3.   Assuming 5 =  45  +  .35Y  and I  =  95  +  .1Y  what is the multiplier?  Also illustrate your answer graphically.

4.   Why does it not matter if businessmen use present value and cost of capital or rates of return and interest rate to make an investment decision?  Why would the investment be made if the respective values of the variables are equal.

5.   What is meant by a full-employment budget?  Do federal government budget deficits matter?

6.   What are the causes of inflation?  What difference do they make in he appropriate policy?