We'll take any questions that you have, and then we'll do the 20-question multiple choice portion of the exam. The take-home portion is worth 30 points, and it will be due on Monday, May 9th. The questions are below.
Remember that you are free to attend the College Counseling reception Monday morning. We'll start class at 9 AM that day.
Problems: (10 points)
1. Components of GDP: (4 points) - Determine if each of the items listed below should be included in GDP and under which component or components: Consumption, Investment, Government, Exports or Imports.
1. A cell phone produced and sold in the US by a Japanese company
2. MPA tuition
3. Social Security payments
4. Best Buy stock purchased from Best Buy
5. The purchase of a plane ticket to Shanghai on Air China
6. The purchase of a US Treasury Bond by an individual
7. A new factory
8. The sale of a previously occupied house
9. A bottle of French wine, sold in the US
10. A television produced, but not sold.
11. A dinner at a restaurant
12. A computer produced in the US and sold in Canada
2. Calculating GDP: (3 points) - Given the following data (in billions of current dollars), calculate the current level of gross domestic product.
Consumption spending $6,000
Social security payments 1,400
Income tax receipts 1,700
Business purchases of new factories and equipment and changes in inventories 2,500
Federal government spending on goods and services 1,700
Construction of new homes 400
State and local spending on goods and services 1,500
3. Federal Reserve "Tools" and Effects: (3 points) - For each Fed "action," complete the chart of effects on the money supply... Fill in 3a through 3f.
Open Market Operations
3a. The Federal Reserve buys securities
3b. The Federal Reserve sells securities
3c. Raising the discount rate
3d. Lowering the discount rate
3e. Raising the reserve requirement
3f. Lowering the reserve requirement
Short answer: (20 points - 5 points each) You need to do four of the following "short answer" questions. Choose any four that you would like from the list. Answers should be between 300 - 500 words or so. You can either print them out or submit them electronically to me as an e-mail attachement.
A. You are asked to present an Emmy Award for the category of "The Most Influential Economist". The three nominees, lucky for us, are Adam Smith, Karl Marx, and John Maynard Keynes. Tell me who you think should win the award. More importantly, provide justification for your choice. (This is a carry-over from last year when we also read Explaining Economics. It's certainly one you could easily research, but we didn't really "teach" these guys this time around.)
B. Martians have landed on the earth, and they want to better understand the American economy. You are allowed to teach them about the two (and only two) economic measures or indicators that you believe reveal the most about the economy. Which two would you choose to explain? Why?
C. Assume that the United States needs a new "chief economist". You have been tapped for the job. At your Senate confirmation hearing, you are asked if your macroeconomic "view" relies more heavily on the "demand" approach or the "supply" side. What would you tell them? Why?
D. Taxes are, however unfortunately, a fact of life in America. Assume that you are on the committee appointed to look at "tax reform". What would you recommend as the best system of taxation in America? (You don't need to talk about specific numbers, but be sure that your choices reflect the values you would want to emphasize in our society.)
E. Here's a "softball" for you. What do you believe should be the role of government in managing and/or regulating the economy?
F. The Federal Reserve Board has been responsible for conducting our nation's money supply for decades. Critics charge that it is often ineffective, sometimes making things worse. Based on what you know, should changes be made in the way the Fed operates? Why or why not?
G. Do budget deficits matter? Justify your answer with reference to ideas discussed in class or the readings.
H. You're in charge of preserving the black rhino. In an answer that shows an understanding of the principles of economics, tell me what you'd do. (Remember the rhino from Naked Economics? If not, pick another question.)
If you'd like to propose another question, let me know...