1. Total labor force growth/yr is 1%/yr, population growth is 1%/yr and productivity growth is 0.5%/yr. What is the growth rate of potential GDP/yr?A) 2.5%, B) 1.5%, c) 0.5%, d) 3.5%.

2. In a period of rapidly increasing inflation in the U.S., which of the following assets would you prefer to own: a) a stamp collection, b) U.S. savings bond where the interest rate is fixed, c) cash.

3.If one taxes "something", one will get more of that something produced. A) true, b) false .

4.Why might long-term interest rates go down at the same time that the Federal Reserve pushes short-term rates up? a) Higher inflation expectations, b) Faster expected economic growth, c) expectations of a recession, d) Faster expected population growth.

5.When Microsoft buys a new car for each of 10 executives what happens to the U.S. money supply? A) It increases, b) It decreases, c) There is no change

6.If the money supply is $500 and nominal GDP is $3,000, the velocity of money is: a) 60, b) 6, c) 1/6, d) unknown

7.Municipal bonds are tax-exempt from the Federal income tax. Assume a new 10-year municipal bond has a 3%/year coupon rate. What would be the required coupon rate on a taxable bond for an investor to be indifferent in holding a taxable bond compared to the 3% tax-free bond? Assume the investor is in a 40% marginal income tax bracket. Both bonds have the same credit quality.

a)1.2%

b)1.8%

c)3.0%

d.5.0%

e)7.5%