Most of these questions are designed to test you on more than one economic concept, so a few sentences will not earn you many points. Since you are being given the opportunity to prepare in advance, these questions will be graded mostly on an all-ornothing basis - very little partial credit will be awarded. An answer that was correct on a previous test may not receive full credit on the final, as a result. Make sure to go through and check that you have answered all parts of the question thoroughly.
1. From the podcasts, "Changing Picture of Poverty: Hard Work is Just ‘Not Enough'"& "One Family's Story Shows How the Cycle of Poverty is Hard to Break": Explain why Economic Growth may not advance the standard of living for all citizens. What roadblocks prevent this? Why do developed countries, like the US, have difficulty addressing these issues? What role does society (the CFD as a whole) have in helping to alleviate these barriers?
2. From Adam Smith's "Wealth of Nations": In describing the market place, Smith observes that: "When the quantity of any commodity which is brought to market falls short of the effectual demand, all those who are willing to pay the whole... will be willing to give more. A competition will immediately begin among them, and the market price will rise." Describe how prices, when allowed to be altered, will adjust to shortages (as Smith describes) or surpluses. Your explanation should include a graph of Supply and Demand. At what point would Smith argue that the "competition" would subside? Explain.
3. From the article, "The World's Biggest Chocolate-Maker Says We're Running Out of Chocolate": Describe, with the aid of a properly labeled Supply and Demand curve, what the reduction in cocoa beans will mean to the price of candy bars. Identify all important outcomes and shifting factors. What do we expect to happen to production of candy bars, and their price, based on your graph? How does the article's argument for substituting ingredients lead to a different price outcome? Support this explanation with a second, properly labeled Supply and Demand curve.
4. From the article, "One Way to Fix the Corporate Tax: Repeal It" and "Cutting the Corporate Tax Would Make Other Problems Grow": What assumptions are these articles making, that leads to different suggestions on how to adjust the Corporate Tax rate? Is there such thing as a correct tax rate? Describe the three types of Tax Proportions. Describe the benefits and drawbacks to taxing Corporations (which are really just upper-income individuals) more?
5. From the article "Debunking the Myth of the Job-Stealing Immigrant": In the presence of elevated unemployment rates and public debates on aid availability to undocumented citizens, the public perception is that citizens would benefit from protecting domestic borders. Describe the fallacy in this argument. Another argument involving the well-being of the domestic economy is that by outsourcing jobs (or allowing foreign-born individuals to be educated in the United States) that jobs that could have been in the U.S. are moved to other countries. Do you agree with this assessment? What are the outcomes of Protectionism laws that restrict jobs moving to other countries?
6. From the article, "What Scented Candles Say to an Economist": Describe how increased Gross Domestic Product spurs advancement in Standard of Living? What incentives are created that promote individuals and business to expand innovation and research & development? How does this incentive change when Gross Domestic Product is not steadily increasing? Your explanation should include a definition of GDP.
7. Define Economics and all of its key terms.
8. From the article, "Netflix's Weak Subscriber Additions at Odds with Lofty Valuation": Why do companies choose to become publicly traded? What are the benefits and drawbacks to this decision? If a company no longer makes money from its stock after an IPO, why might they still be concerned with trying to control the stock price? What ramifications do large swings in the stock price have on the company?
9. Economist Milton Friedman once said: "I do not believe that the solution to our problem is simply to elect the right people. The important thing is to establish a political climate of opinion which will make it politically profitable for the wrong people to do the right thing. Unless it is politically profitable for the wrong people to do the right thing, the right people will not do the right thing either, or if they try, they will shortly be out of office." Describe the role of the Household in an economic system. In terms of the Circular Flow Diagram, what do you believe that Friedman meant by this statement? How does the participation and knowledge of the population augment the influence of the other entities in an economy? You should use a properly labeled Circular Flow Diagram to support your explanation.
10. From the articles, "How Machines Destroy (and Create!) Jobs, in 4 Graphs" and "Will Your Job Be Done By Machines: Does all job creation equally influence an economy? Explain. How might the creation of different job types result in the Unemployment Rate being an inadequate estimate of the labor market and labor conditions? U.S. Net job creation has averaged over 250,000 jobs per month during the last year. Describe how this has resulted in the Unemployment Rate decreasing in some months, increasing in some months, and experiencing no change in some months. Make sure to define any concepts from the course that you use in your explanation. ** NET job creation already accounts for any lost jobs during that month, so a positive Net job creation means that more employment opportunities are available.
11. Describe Fiscal Policy and Monetary Policy; include who has authority to establish each, along with the "levers" that make up each.
What are the inherent problems and benefits of each? Can the two be used together to solve efficiency issues in the economy?
Describe how that relationship would look. What aspects would allow both to work with the most potential?
12. From the article, "A Burger Joint Pays $15 An Hour. And Yes, It's Making Money": Why might a restaurant (such as the one in the article) benefit from paying its workers $15 an hour, while others may not? What must be true of each company? Explain with the aid of a properly labeled Supply and Demand curve for each company. What are the other outcomes of the self-imposed Minimum Wage, according to the article? Does the fact that this restaurant is profitable support the argument that all Minimum Wages should be raised? Explain.
13. From the article, "Faith in an Unregulated Free Market? Don't Fall for It": Describe the two primary types of government structures?
What are the benefits and drawbacks to each? How are the drawbacks from each structure benefits of the other? Is it possible to have an operational structure that is pure Capitalist or pure Socialist, meaning that they operate exactly the way each is defined? Explain.
14. From the article, "What People Mean When They Say, ‘Audit the Fed'": What is Monetary Policy? Why is it designed to be out of the reach of political control? What are the benefits and drawbacks to this? What is the Dual Mandate? How do the two components of the Dual Mandate tend to be contradictory to each other (tend to move in opposite directions)? In what ways does this make government isolation a greater benefit, and greater drawback? Explain.
15. From the article, "Brace Yourself: The Presidential Election is Going to be All about Anger": What are the two "levers" that make up Fiscal Policy? Is each fully at the discretion of the government, or are there boundaries on how they establish this policy each year? Economists describe Growth Policy and Stabilization Policy as two significant theories that drive policy making. What is each? What are the benefits and drawbacks of each? When is each ideally used?