Honors Economics Essay Examination – 2008



Honors Economics Final Essay Examination

Choose five of these questions and answer them fully on clean ruled paper, backing up your answers. Each question will be 20% of the total for this grade. (If you only do four, 80% is your maximum!) The Essay Exam grade is 50% of the total Final Exam grade.

1.

|[pic] |Making Comparisons Compare a command economy to a market economy by listing a strength and a weakness of |

| |each. State how each type of economy satisfies the wants and needs of individuals. |

| | |

2.

|When Ronald Reagan ran for president in 1980 he rejected the prevailing economic theory. He believed in free markets and opposed the idea that |

|the federal government should influence the ups and downs of business with its policies. He particularly rejected the idea of government |

|spending more than it takes in and the national debt that results. |

|Source: Adapted from "Reaganomics Shape 1980s Economy." 1997. |

|[pic] |Based on this passage, do you think Ronald Reagan would have favored a government-sponsored program to give jobs to |

| |unemployed people? Explain. |

3.

|[pic] |Making Comparisons Define and compare mergers, conglomerates, and multinationals. How does each of these |

| |business forms benefit the consumer? |

| | |

4. [pic]

|[pic] |Which demand curve on the graph is more elastic, Curve A or Curve B? Explain. |

5.

|The number of housing starts shows the demand for new homes. Economists forecast housing starts by using the current month’s permits as a |

|predictor. Building permits tend to move in tandem with starts on a month-to-month basis. They are also considered to be a leading indicator|

|of the economy in general. Increases in building permits and starts are common during periods following a drop in mortgage rates. |

|Source: Standard & Poor’s. |

|[pic] |Based on the passage and what you know about demand, explain why increases in building permits and starts |

| |are common during periods following a drop in mortgage rates. |

6.

|Market Demand and Supply Schedules |

|Price |Quantity Demanded |Quantity Supplied |Surplus/Shortage |

|$20 |0 |20 |20 |

|18 |2 |16 |14 |

|16 |4 |10 |6 |

|14 |7 |7 |0 |

|12 |11 |5 |? |

|10 |13 |0 |–13 |

|[pic] |Suppose sellers of the product described in the table set their price at $18. What evidence will they see |

| |that tells them that this price is too high? Use supply and demand concepts to explain how the sellers in |

| |this example will likely adjust their price. |

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7.

|[pic] |Evaluating Information Why is it difficult to get a completely accurate measure of unemployment? |

8 . [pic]

|[pic] |According to the graph, what happened to the purchasing power of money in the late 1970s? Explain. |

9.

|[pic] |Determining Relevance Are supply and demand curves useful for determining how a change in monetary policy |

| |will impact interest rates in the short run? Explain. |

10 . [pic]

|[pic] |On the graph, what is the GDP gap between Points a and c? Explain what this means. |

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