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Dr. S. K. Mitchell (828-7142)
ECO 211
STUDY GUIDE FOR FINAL EXAM
Finals Week Office Hours:
Monday, December 14, 2-5 p.m.
Tuesday, December 15, 11-12
Wednesday, December 16, 3-5 p.m.
This study guide covers only the material since the third midterm. In addition to the
topics covered here, there will be a few questions about the Alan Blinder video. The
exam is comprehensive. It will have 70 multiple choice questions evenly covering the
material in the semester. Use the earlier study guides to study the earlier material.
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Why do liberals tend to favor increased government spending while conservatives
tend to favor decreased taxes as the preferred tool of expansionary fiscal policy?
What are the reasons for and against counter-cyclical policies?
In the case of a contractionary gap, which will result in the largest private sector,
counter-cyclical monetary policy or spending policy?
Why is counter-cyclical (or activist) policy thought to be inflationary?
What is the monetarist’s rule for preventing inflation or deflation in the long run?
How are adaptive expectations formed?
How are rational expectation formed?
What are the policy implications of rational expectations?
What was the original conception of the Phillips curve?
How did policymakers try to “exploit” to Phillips curve? What was the result,
beginning about 1970?
How has the original idea of the Phillips curve been modified?
Why is the long run Phillips curve believed to be vertical?
What was surprising to economists (at the time) about the economy during the
1970s?
What does it mean for a policy to be a supply-side policy?
Name government policies that might be considered to be supply-side policies.
Why is it hard to figure out whether supply-side economics works?
What is the distinction between the government budget deficit and the debt?
How is the Federal deficit financed?
What is crowding out?
Why are economists concerned about crowding out?
How will future generations be affected by today’s deficits?
Define comparative advantage.
What determines a country’s comparative advantage?
Will a country import or export the goods in which it has a comparative advantage?
Is it harmful to trade with a country that is more productive than one’s own
country?
Does international trade increase total consumption in an economy?
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Does international trade increase consumption for everyone? Explain who gains
and who loses.
Give examples of common barriers to trade.
What are the effects of an import tariff? Who is helped, who is hurt?
Why is it easier for producers to organize to get import protection than it is for
consumers to organize to prevent it?
Know the arguments and counter-arguments for import protection.
Be able to work problems converting currencies.
What variables affect the demand for a particular currency?
Why is the demand for a currency influenced by the demand for that country’s
exports?
Why is the demand for a currency influenced by that country’s interest rates?
What are the three types of exchange rate systems? Which type does the US
have?
What determines the supply of a currency in the foreign exchange market?
How does the exchange rate influence net exports?
Where did the current Asian economic crisis begin?
Why do Asians find imported goods to be a lot more expensive now?
Why do many Asian countries have high interest rates now?
Why would cutting interest rates help ease the current recession in Asia?
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