Final Exam Study Problems *corrected*

**This is corrected as of 4:05 p.m. Dec 16, 2004**
** Problem 18 is B, not C (as previously reported).**
** Problem 25 is C, not A (as previously reported).**

Thank you to those who found the errors.

Here is the key to the practice problems from the final exam study guide.

1-A; 2-B; 3-D; 4-C; 5-D; 6-B; 7-C; 8-B; 9-C;
10-A; 11-D; 12-B; 13-B; 14-D; 15-A; 16-B; 17-A; 18-B;
19-D; 20-D, 21-D; 21-D; 22-D; 23-C; 24-C; 25-C; 26-C; 27-A; 28-B;
29-C; 30-D; 31-A; 32-C; 33-A; 34-B; 35-C; 36-D; 37-C;
38-B; 39-C; 40-B; 41-D; 42-A; 43-B; 44-A

If you think there are any error or if you have any questions, email me at jjulian@iup.edu or IM CinciDood.

Comments on Problem Set #4

Problem #1. I don't think this is that difficult. If you have problems with algebra, go ask your roommate. You have the equations. Solve for the unknowns. For C and D, use the information given in B regarding the change in real output.

Problem #2. Begin all problems from an initial long-run equilibrium. Short run: AD or AS(SR) will change. There should be greater or less than full employment. Long run: AS(SR) or AD will adjust to the initial action. Get the picture right. Offer an explanation.

Problem #3 and #4 all start initially at less-than-full employment.

Problem #5 Part (A) should read "What is the initial effect of the spending increase on aggregate spending. (Not tax reduction. There is no tax reduction in the set up of the problem. Sorry for the confusion.)