Part A: Answer each of the following questions in one to three paragraphs.
1. Assuming no government intervention, describe the market behavior that should result
if the price of a product is below its equilibrium price; then describe the behavior that
should occur if the price is above its equilibrium price.
2. How does inflation affect people’s standards of living and savings?
3. Define stock, bond, and mutual fund. What are the benefits and risks associated with
each of these investments?
Part B: Answer each of the following questions in one to four sentences.
1. Suppose the economy is experiencing inflation. What would be the interpretation of
how a restrictive monetary policy would address this problem?
2. Describe two types of specialization in production. What are the economic advantages
3. What are political business cycles, and how could they be created?
4 .. Why are financial institutions required to keep reserves?
5. What is a price ceiling, and what are its economic effects?
6. Define the concept of offshoring, and explain the economic reasons why businesses
7. What is meant by economies of scale, and what is the importance of this concept
to economic growth?
8. Define and explain each of the following: frictional unemployment, structural
unemployment, and cyclical unemployment.
9. What is the multiplier effect, and how does it affect the GDP?
10. Define the term business cycle, and list the four phases of the business cycle.
Proctored Final Examination