Total Marks:  Weight: 5%
a. Why do economists include only final goods in measuring GDP for a particular year? Why don’t they include the value of the stocks and bonds bought and sold? Why don’t they include the value of the used furniture bought and sold? 
b. What are the four phases of the business cycle? 
Qs. 2 Recent figures showed the CPI at 210. , while one year earlier it was 202. 2. 
a. What was the rate of inflation over the previous year?
b. At this rate of inflation, approximately how long will it take for the price level to double?
Qs. 3 A hypothetical economy’s consumption schedule is given in the table below.
a. If disposable income were $7400, how much would be saved?
Use the information to answer the following: 
b. What is the “break-even” level of disposable income? What is this economy’s marginal propensity to consume?
c. What is the average propensity to consume when disposable income is $7000? When disposable income is $8000?
a. Suppose a $100 increase in desired investment spending ultimately results in a $300 increase in real GDP. What is the size of the multiplier? 
b. If the MPS is . 4, what is the multiplier? 
c. If the MPC is. 75, what is the multiplier? 
d. Suppose investment spending initially increases by $50 billion in an economy whose MPC is 2/3. By how much will this ultimately change real GDP? 
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