Name: Registration Number: Program: Total Marks: [20] Weight: 5% ………………………………………………………………………………………………………………………………………. Qs. 1 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? [4] b. What are the four phases of the business cycle? [3] Qs. 2 Recent figures showed the CPI at 210. , while one year earlier it was 202. 2. [3] 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. GDP=DI| C| 6600| 6680| 6800| 6840| 7000| 7000| 7200| 7160| 7400| 7320| 7600| 7480| 7800| 7640| 8000| 7800| Use the information to answer the following: [5] a. If disposable income were $7400, how much would be saved? b. What is the “break-even” level of disposable income? . What is this economy’s marginal propensity to consume? d. What is the average propensity to consume when disposable income is $7000? When disposable income is $8000? Qs. 4 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? [1] b. If the MPS is . 4, what is the multiplier? [1] c. If the MPC is . 75, what is the multiplier? [1] 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? [2]