ECON 201

Final Exam

Winter 2002

NAME (Please Print) _______________________

Part 1: 25 multiple-choice questions

Part 2: Short-answer questions

Note: show all work and formulae

1. Imagine a situation in which the yield on Treasury bills has been about 8% in recent years and you, as chair of the Federal Reserve Board, are determined to see it fall to 5%. Outline a strategy for achieving this goal. What assumptions do you make about the values of Inflation and Output? Show formulae and work.

2. Explain Purchasing Power Parity.

3. A third world country asserts that it cannot compete in the global economy because it lacks technology, its labor force is uneducated and lacks marketable skills, and the country has few resources. What comparative advantage might this country possess? Explain.

4. Use the aggregate demand/aggregate supply model to show a recessionary gap. Label all elements.