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~ '1st' Exam Review Questions ~



1)  Recall our class discussion of "Models" in general and the "Stock Market Model" in particular.   Applying the model, illustrate and explain how changes in important 'variables' can influence the Stock Market.
Consider the following "financial developments":
[a] "The Central Bank's Boost of Key Rate By A Quarter-Point to 2.75% Sends Chill Up Wall Street";
[b] "Markets React to Oil Price Rise to $57 a Barrel"
[c] "Concerns About Corporations's Financial Accounting Rack Market"



2) In  "What's wrong with the GDP?",   the advocates of the Genuine Progress Indicator (GPI) state that instead of separating "costs and benefits", and "productive" activities from "destructive" ones, the Gross Domestic Product (GDP) assumes that every monetary transaction adds to "well being". What evidence do the advocates offer in support of their view?  Explain (give ‘three' specific examples).  I suggest that you read the "The Incredible Shrinking Middle Class" and give special consideration to the issue of 'Income & Wealth Distribution'.   A review of recent trends can be found in the  "Income Inequality Charts",  "Wealth Inequality Charts" ,  & "CEO Pay Charts" . Optional:  You may find the 'special report' "Wealth & Democracy" instructive .  Additional data can be accessed at the "Briefing Room I" and at the "Briefing Room II".



3) The authors of the "Three Economists" tell us that Marx's Model of Capitalism  (M - C....P....C'- M')  can be used as a guide to understanding the "origins of crisis" and the "nature of the business cycle".  Do you agree or disagree?  Explain and illustrate with Marx's schema.   Optional: You may find the article "Manifesto Destiny: The Enduring Sexiness of Karl Marx" interesting.



4) What is the current Unemployment Rate? How many millions of people are out of work? According to many economists, people may experience unemployment a 'number of times' and for a 'variety of reasons'. Do you agree or disagree? Explain (give examples).  Also, comment on the effects of unemployment on individuals, families, communities, and the nation.  You may find a review of the following instructive:  "If America is Richer, Why Are its Families So Much Less Secure?", "The Poor Have More Things Today- Including Wild Income Swings", and "How Just a Handful of Setbacks Sent the Ryans Tumbling Out of Prosperity".  The video "Job Threat" is very informative.  Relevant charts can be accessed at the "Briefing Room" , and "Economagic".



5) What are the "Two Faces of Inflation"? What is the current Inflation Rate?  Illustrate both faces with the "Supply & Demand Model" . Note the possible effects of the current rate of inflation.   Explain.  Relevant charts can be accessed at the "Briefing Room" , and "Economagic".



6) A "Jr. Economist", such as yourself, would predict that the recently reported 'increase' in the U. S. Trade Deficit will 'increase' the chances of a ‘slowdown' in our economic activity. T/F,  Explain.  Also, illustrate with the "Leakage & Injection Model" . For a 'deficit update', read "Trade deficit in January is 2nd-highest ever" .   Relevant charts can be accessed at the "Briefing Room" , and "Economagic" .



7) Recall Adam Smith's emphasis on "Capital Accumulation" in explaining the Growth of Capitalism ("Three Economists") , Hall and Lieberman's presentation of the Classical Long-Run Macro Model, our class discussion and explain and illustrate how an improvement in the division of labor ( Smith's "Pin Factory" ) could contribute to the process of economic growth.



8) Suppose the Wall Street Journal reported that Investment Expenditures are expected to rise in the coming year. Would it be correct to conclude that the GDP will increase by the same amount as the expected rise in Investment Expenditures? Explain and illustrate with the "AE & AO Model".  Also, list four determinants of Investment Expenditures. Relevant charts of Investment Expenditures can be accessed at the: "Briefing Room" , and "Economagic" .




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