Economics 407 Chapters 3 Fall, 2017 Quiz 2

Economics 407 Chapters 3 Fall, 2017 Quiz 2Question
1) A. What is causality?
B. Give a paradigm of a Causal theory.
C. Give a paradigm of a non-causal theory.
2) A) What were two important economic effects of the Great Depression in the US from 19291933 according to Prof. Holmes?
B) What arguably was the consequences of the Great Depression upon US society and politics?
3) A) What are the three reasons Prof. Holmes gave for why macroeconomics is difficult?
B) Explain one of these using a paradigm?
4) A. What are two properties which distinguish a scientific from a non-scientific theory ?
B. Relate the concept of “replication” to accepting or rejecting a scientific theory? ( hint the
concepts of a function and a non-function may be helpful.)
5) A. Explain the difference between a “Historical” and “Abstract” time. B. Which one, and why, should/can not be used in a scientific theory? Textbook:
6) A. Define an exogenous and an endogenous variable.
B. Relate these to a causal theory.
7) A. Give the equation for GDP
B. Define each variable used. 3
Use the following data for questions 9-10. For each give the algebraic equation that you employ:
2. Economists have calculated the following values for some country A.
Economic Variables
Billions of Dollars
Consumption expenditures
Transfer payments
Total tax revenue (including SS and med. tax
Nonresidential Investment
Residential Investment
Inventory Investment
Government Spending on goods and services
8) A) Calculate the value of private saving?
Show formula you use.
B) Calculate the value of total demand for final goods (equal total income) measured by GDP in
Country A?
Show formula you use.
9) A) Calculate the value of Country A’s Net Exports?
Show formula you use.
Does this represent a trade surplus or a trade deficit?
B) Is Country A running a balanced budget, budget deficit, or budget surplus?
How much?
C) Specify from the entries in the table above which categories of goods will be included in the
calculation of the: 1. CPI;
2. GDP deflator; 10) Explain how a country’s imports can exceed its GDP? Give a numerical example.
11) WSJ, (9/8/17) Summarize Martin Feldstein’s argument in “We’re Richer Than We Realize.” 4 12) (9/5/17) Summarize John Cochrane’s argument in “Tax Consumption Through a VAT, and
Voila” Tax heaven is attained.

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