Final Exam — Cumulative (Weeks 1–15) · Objectives 1–8

Course: Principles of Macroeconomics (ECON 2) · Silver Oak University (fictional sample) · Prof. Ashford
Scope: Cumulative — all eight objectives, Weeks 1–15 (the macro perspective, scarcity & the PPF & positive vs. normative; measuring output: GDP, real vs. nominal & the deflator; measuring inflation & unemployment: the CPI, the u-rate & LFPR; growth & the rule of 70; the AD–AS model, comparative statics & output gaps; fiscal policy, the spending multiplier & deficits vs. debt; money, banking, the Fed, the money market & the transmission mechanism; the Phillips curve, the quantity theory, comparative advantage & exchange rates).
Format: 25 items, 100 points (4 each) · mixed item types (multiple-choice, multiple-answer, matching, true/false) · described-graph and curve-shift items stated in words · NO free numeric entry · auto-gradable.
Points: 100 · Assignment group: Final (25% of the course grade) · Window: opens Mon Dec 14; due Sun Dec 20 (six days later). No quiz, discussion, assignment, or workshop this week — the Final stands in for all of them. AI is not permitted on the Final.

This is the human-readable exam with its vetted answer key and one-line feedback. The import-ready Classic QTI 1.2 is in L-final-week-16-qti.xml (generated by the shared validated Python script — parses with 25 items, parses clean). The Canvas placement block is at the bottom.

This is the live exam. Its paired ungraded rehearsal — O-practice-final-week-16.md — mirrors this blueprint with fresh variants and shares none of these items, none of the Week 8 midterm's items, and none of any weekly quiz's items.

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Blueprint (items → objective → source weeks)

The Final covers Objectives 1–8 across 25 items, weighted so that the post-midterm material (Objectives 7–8 — money, banking, the Fed, monetary transmission, the Phillips curve, the quantity theory, and the open economy) carries the heaviest share, since the midterm already tested Objectives 1–6. The item-by-item map:

#	Type	Concept	Objective	Source weeks
1	Multiple choice	PPF opportunity cost (quantitative, fresh)	1	1
2	True/False	Positive vs. normative classification	1	1
3	Multiple choice	GDP via expenditure approach (quantitative, fresh)	2	2
4	Multiple choice	GDP deflator computation (quantitative, fresh)	2	2
5	Multiple choice	CPI & inflation rate (quantitative, fresh basket)	3	3
6	Multiple choice	Unemployment rate & LFPR (quantitative, fresh)	3	3
7	Multiple choice	Growth rate & rule of 70 (quantitative, fresh)	4	4
8	Multiple choice	AD–AS comparative statics — fresh linear system, AD shifts right (quantitative)	5	5
9	Multiple choice	Recessionary/inflationary gap diagnosis (quantitative, fresh)	5	6
10	Matching	Policy tool/event → AD–AS effect	5	5/6
11	Multiple choice	Spending multiplier (quantitative, fresh)	6	7
12	Multiple choice	Deficit vs. debt (quantitative, fresh)	6	7
13	Multiple choice	Money multiplier & the T-account (quantitative, fresh)	7	9
14	Multiple choice	Functions of money — matching-adjacent concept check	7	9
15	Multiple choice	Money market — Fed tool → MS & r direction (quantitative)	7	10
16	Matching	Fed policy tool → effect on MS/r	7	10
17	Multiple choice	Transmission mechanism — full chain (quantitative, fresh)	7	11
18	Multiple answer	Fiscal vs. monetary policy — which body wields which tool	7	7/9/10
19	Multiple choice	MV = PQ — quantity theory (quantitative, fresh)	8	12
20	Multiple choice	Short-run vs. long-run Phillips curve	8	12
21	Multiple choice	Comparative advantage — opportunity-cost ratios (quantitative, fresh)	8	13
22	Multiple choice	Exchange rates — appreciation/depreciation & NX (quantitative, fresh)	8	14
23	Matching	Schools of thought → claim (Keynesian vs. classical/monetarist)	1	15
24	True/False	Deficit reduces the debt (misconception check)	6	7
25	True/False	LR Phillips curve is vertical (agreed ground, not both-sided)	8	12

Objective totals: Obj 1 = 2 (Q1, Q2) · Obj 2 = 2 (Q3, Q4) · Obj 3 = 2 (Q5, Q6) · Obj 4 = 1 (Q7) · Obj 5 = 3 (Q8, Q9, Q10) · Obj 6 = 3 (Q11, Q12, Q24) · Obj 7 = 6 (Q13–Q18) · Obj 8 = 5 (Q19, Q20, Q21, Q22, Q25) · Obj 1 (synthesis, W15) = 1 (Q23) → 25 items, 100 points.

(Q23 is tagged to Obj 1's positive/normative synthesis strand and Week 15's schools-of-thought material; it is counted once in the 25-item total and shown under its own heading below.)

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Questions, Key, and Feedback

Objective 1 — The Macro Perspective, the PPF & Positive vs. Normative (Week 1)

Q1 (MC) — PPF opportunity cost. An economy's straight-line PPF runs between 30 units of consumer goods (and 0 capital goods) and 10 units of capital goods (and 0 consumer goods). What is the opportunity cost of producing 1 capital good?
- A. 1/3 of a consumer good
- B. 3 consumer goods ✅
- C. 10 consumer goods
- D. 30 consumer goods
Feedback: Opportunity cost of 1 capital good = (max consumer goods) ÷ (max capital goods) = 30 ÷ 10 = 3 consumer goods. (Pre-verified: 30/10 = 3.) A is the OC of 1 consumer good (10/30 = 1/3 capital good) — the classic flip error. Always state the cost in the OTHER good.

Q2 (T/F) — Positive vs. normative. The statement "the government should prioritize fighting inflation over reducing unemployment" is a POSITIVE (testable) statement.
- True
- False ✅
Feedback: False. This is a normative statement — it expresses a value judgment about what the government "should" prioritize. A positive version of a related claim would be purely descriptive and testable, e.g., "inflation was 4% and unemployment was 5% this quarter" — a fact, not a value judgment about priorities.

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Objective 2 — Measuring Output: GDP, Real vs. Nominal & the Deflator (Week 2)

Q3 (MC) — GDP via the expenditure approach. A fictional economy reports the following (in billions): consumption C = 700, investment I = 300, government spending G = 200, exports X = 140, imports M = 170. Using the expenditure approach, GDP equals —
- A. $1,340 billion
- B. $1,310 billion
- C. $1,170 billion ✅
- D. $1,030 billion
Feedback: First, NX = X − M = 140 − 170 = −30 (a trade deficit — still added to GDP as a negative number). Then GDP = C + I + G + NX = 700 + 300 + 200 + (−30) = $1,170 billion. (Pre-verified.) A adds X and M instead of subtracting; B and D result from arithmetic slips in summing the components.

Q4 (MC) — GDP deflator. An economy's nominal GDP this year is $1,100 billion; its real GDP (in base-year prices) is $880 billion. The GDP deflator equals —
- A. 80
- B. 100
- C. 125 ✅
- D. 880
Feedback: GDP deflator = nominal GDP ÷ real GDP × 100 = 1,100 ÷ 880 × 100 = 125. (Pre-verified.) A results from flipping the ratio (880 ÷ 1,100 × 100 = 80) — a classic formula-flip error. A deflator above 100 means prices have risen relative to the base year.

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Objective 3 — Measuring Inflation & Unemployment (Week 3)

Q5 (MC) — CPI & inflation rate. A fixed CPI basket costs $80 in the base year (20 notebooks @ $3 + 10 pens @ $2). In year 2, the same basket costs $94 (notebooks now $3.60 each, pens now $2.20 each). What is the year-2 CPI (base year = 100), and the inflation rate from the base year to year 2?
- A. CPI = 94; inflation = 6%
- B. CPI = 117.5; inflation = 17.5% ✅
- C. CPI = 117.5; inflation = 117.5%
- D. CPI = 100; inflation = 0%
Feedback: CPI = (year-2 basket cost ÷ base-year basket cost) × 100 = 94 ÷ 80 × 100 = 117.5. Inflation rate = (117.5 − 100) ÷ 100 × 100 = 17.5%. (Pre-verified: 20×3.60 + 10×2.20 = 72 + 22 = 94.) C confuses the CPI level with the inflation rate — the inflation rate is the percentage CHANGE, not the index number itself.

Q6 (MC) — Unemployment rate & LFPR. In a fictional economy, the adult (16+) population is 160 million. Of these, 96 million are employed and 4 million are unemployed (actively searching for work). The unemployment rate and the labor-force participation rate (LFPR) are —
- A. Unemployment rate = 4%; LFPR = 60%
- B. Unemployment rate = 4%; LFPR = 62.5% ✅
- C. Unemployment rate = 2.5%; LFPR = 62.5%
- D. Unemployment rate = 4%; LFPR = 100%
Feedback: Labor force = employed + unemployed = 96 + 4 = 100 million. Unemployment rate = 4 ÷ 100 × 100 = 4%. LFPR = labor force ÷ adult population = 100 ÷ 160 × 100 = 62.5%. (Pre-verified.) C miscomputes the unemployment rate using the adult population instead of the labor force as the denominator — the classic denominator error.

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Objective 4 — Growth & Productivity (Week 4)

Q7 (MC) — Growth rate & the rule of 70. An economy's real GDP rises from $700 billion to $763 billion over one year. Using the rule of 70, approximately how many years would it take real GDP to double if it continued growing at THIS rate?
- A. 63 years
- B. Growth rate = 9%; years to double ≈ 7.8 years ✅
- C. Growth rate = 9%; years to double ≈ 630 years
- D. Growth rate = 63%; years to double ≈ 1.1 years
Feedback: Growth rate = (763 − 700) ÷ 700 × 100 = 9%. Rule of 70: years to double ≈ 70 ÷ 9 ≈ 7.8 years. (Pre-verified: 63/700 = 0.09 = 9%; 70/9 ≈ 7.78.) C and D result from the classic error of multiplying instead of dividing, or misreading which figure is the growth rate.

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Objective 5 — The AD–AS Model, Comparative Statics & Output Gaps (Weeks 5–6)

Q8 (MC) — AD–AS comparative statics. In an economy, aggregate demand is given by P = 24 − Y/200 and short-run aggregate supply by P = 8 + Y/200 (Y in billions, P a price-level index), giving an initial equilibrium of Y* = 1,600, P* = 16. Expansionary monetary policy then shifts AD to P = 27 − Y/200. The new equilibrium is —
- A. Y* = 1,600, P* = 16 (unchanged)
- B. Y* = 1,900, P* = 17.5 (both price level and real output rise) ✅
- C. Y* = 1,300, P* = 14.5 (both price level and real output fall)
- D. Y* = 1,900, P* = 14.5 (real output rises but price level falls)
Feedback: Setting the new AD equal to SRAS: 27 − Y/200 = 8 + Y/200 → 19 = 2Y/200 → Y* = 1,900. Substituting: P* = 27 − 1,900/200 = 17.5. (Pre-verified.) A rightward shift of AD (from expansionary monetary policy lowering interest rates and raising investment) raises BOTH the price level and real output. D incorrectly pairs higher output with a lower price level, which never happens from a pure AD shift.

Q9 (MC) — Output gap diagnosis. An economy's potential output (Y*) is $1,500 billion. Its actual real GDP this quarter is $1,425 billion. This economy is experiencing —
- A. an inflationary gap of $75 billion (5% of potential)
- B. a recessionary gap of $75 billion (5% of potential) ✅
- C. a recessionary gap of $1,425 billion
- D. no output gap, because actual GDP is close to potential
Feedback: Actual output ($1,425B) is BELOW potential ($1,500B) → recessionary gap = 1,500 − 1,425 = $75 billion, which is 75 ÷ 1,500 × 100 = 5% of potential. (Pre-verified.) A mislabels the gap direction — actual output is BELOW, not above, potential, so this is recessionary, not inflationary.

Q10 (Matching) — Policy tool/event → AD–AS effect. Match each event or policy tool to its predicted effect on the AD–AS model.
| Event / policy tool | Correct predicted effect |
|---|---|
| A cut in the corporate tax rate that boosts business investment | AD shifts right — price level and real output both rise |
| A sudden, sharp rise in the price of a key imported raw material | SRAS shifts left — price level rises, real output falls (stagflation) |
| A major advance in production technology adopted economy-wide | LRAS shifts right — the economy's long-run potential output grows |
| A sharp fall in consumer confidence that cuts planned spending | AD shifts left — price level and real output both fall |
Feedback: A corporate tax cut raises investment, one of AD's own components, shifting AD right. A raw-material cost shock raises production costs at every output level, shifting SRAS left (stagflation). A technology advance raises what the economy CAN produce at full employment, shifting LRAS right — a long-run growth event, distinct from a short-run demand or supply shock. A confidence drop lowers planned consumption, shifting AD left. (The distractor "SRAS shifts right" does not belong to any of these four events — it would instead follow a FALL in input costs.)

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Objective 6 — Fiscal Policy, the Multiplier & Deficits vs. Debt (Week 7)

Q11 (MC) — Spending multiplier. In an economy with a marginal propensity to consume (MPC) of 0.8, government spending rises by $35 billion. The total change in GDP is —
- A. $28 billion
- B. $35 billion
- C. $175 billion ✅
- D. $700 billion
Feedback: Multiplier = 1 ÷ (1 − MPC) = 1 ÷ (1 − 0.8) = 1 ÷ 0.2 = 5. ΔY = ΔG × multiplier = 35 × 5 = $175 billion. (Pre-verified.) A results from multiplying by MPC itself (35 × 0.8) rather than the multiplier — a common confusion between MPC and the multiplier formula. D results from using 1/MPC instead of 1/(1−MPC).

Q12 (MC) — Deficit vs. debt. A government's revenue this year is $440 billion; its spending is $500 billion. The national debt was $1,100 billion before this year. After this year, the debt is —
- A. $1,100 billion — the debt is unaffected by a single year's deficit
- B. $1,160 billion — this year's $60 billion deficit adds to the existing debt ✅
- C. $1,040 billion — the deficit reduces the debt
- D. $500 billion — the debt resets to this year's spending total
Feedback: Deficit = spending − revenue = 500 − 440 = $60 billion (a FLOW, this year only). The debt (a STOCK) accumulates every year's deficit: new debt = 1,100 + 60 = $1,160 billion. (Pre-verified.) C makes the classic error of treating a deficit as if it REDUCES the debt — only a surplus does that.

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Objective 7 — Money, Banking, the Fed & Monetary Policy (Weeks 9–11)

Q13 (MC) — Money multiplier & the T-account. A bank receives a new deposit of $2,000. The required reserve ratio (RR) is 10%. What are the required reserves on this deposit, the amount available for the first loan, and the theoretical maximum total money-supply expansion this deposit can support?
- A. Required reserves = $1,800; first loan = $200; maximum expansion = $2,000
- B. Required reserves = $200; first loan = $1,800; maximum expansion = $20,000 ✅
- C. Required reserves = $200; first loan = $1,800; maximum expansion = $10,000
- D. Required reserves = $2,000; first loan = $0; maximum expansion = $20,000
Feedback: Required reserves = deposit × RR = 2,000 × 0.10 = $200. First loan = deposit − required reserves = 2,000 − 200 = $1,800. Money multiplier = 1/RR = 1/0.10 = 10, so maximum expansion = 2,000 × 10 = $20,000. (Pre-verified.) A swaps the reserve and loan figures. C uses the wrong multiplier value (a common slip with RR = 10%, easy to mis-recall as 1/0.20).

Q14 (MC) — Functions of money. A worker is paid in dollars, uses dollars to buy groceries, and also keeps some dollars in a savings account to spend later. Which THREE functions of money does this scenario illustrate, in order?
- A. Store of value; unit of account; medium of exchange
- B. Medium of exchange (buying groceries); unit of account (prices stated in dollars); store of value (savings for later) ✅
- C. Medium of exchange; store of value; legal tender
- D. Unit of account; legal tender; medium of exchange
Feedback: Money serves three core functions: a medium of exchange (used to buy goods and services directly), a unit of account (prices and values are stated in a common unit, here dollars), and a store of value (it retains purchasing power to be spent later). "Legal tender" is a legal status, not one of the three economic functions of money taught in this course.

Q15 (MC) — The money market. Money demand is given by r = 15 − M/100 (M in $B, r in %). The money supply is vertical at M = 700. The Fed then buys government bonds, raising the money supply to M = 800. What happens to the equilibrium interest rate?
- A. It rises from 5% to 7%, because buying bonds withdraws money from circulation
- B. It falls from 8% to 7%, because buying bonds injects money into the banking system ✅
- C. It stays at 8%, because money demand does not respond to the money supply
- D. It rises from 7% to 8%, because a larger money supply raises the price of borrowing
- (Note: the values above are intentionally NOT the answer — solve directly from the given demand curve.)
Feedback: At M = 700: r = 15 − 700/100 = 8%. At M = 800: r = 15 − 800/100 = 7%. The Fed buying bonds injects reserves into the banking system, raising the money supply and LOWERING the equilibrium interest rate — from 8% to 7%. (Pre-verified.) Buying bonds always raises the money supply and lowers r; selling bonds does the reverse.

Q16 (Matching) — Fed policy tool → effect on MS/r. Match each Federal Reserve policy action to its correct effect on the money supply and the interest rate.
| Fed policy action | Correct effect |
|---|---|
| The Fed buys government bonds on the open market | Money supply increases; the interest rate falls |
| The Fed sells government bonds on the open market | Money supply decreases; the interest rate rises |
| The Fed raises the reserve requirement (RR) | Money supply decreases (banks can lend less); the interest rate tends to rise |
| The Fed raises the interest rate it pays banks on reserves (IOR) | Money supply decreases (banks prefer holding reserves); the interest rate tends to rise |
Feedback: Buying bonds injects reserves → MS↑ → r↓. Selling bonds withdraws reserves → MS↓ → r↑. Raising RR forces banks to hold more of each deposit idle, shrinking the money multiplier and MS → r↑. Raising IOR makes holding reserves more attractive than lending them out, shrinking effective MS → r↑. All four are Fed (monetary) tools — none of them belong to Congress.

Q17 (MC) — Transmission mechanism. The Fed buys bonds, raising the money supply from $900B to $1,000B, which lowers the interest rate from 9% to 8% (a 1-point drop). Investment responds by rising $22 billion for every 1-point drop in the interest rate. If the spending multiplier is 5, what is the total change in real GDP, and what happens to the AD–AS equilibrium?
- A. ΔY = $22 billion; AD shifts left; P falls and Y falls
- B. ΔY = $110 billion; AD shifts right; P rises and Y rises ✅
- C. ΔY = $110 billion; AD shifts left; P rises and Y falls
- D. ΔY = $22 billion; AD shifts right; no change in P or Y
Feedback: ΔI = $22 billion (one point of rate drop). ΔY = ΔI × multiplier = 22 × 5 = $110 billion. The full chain: MS↑ → r↓ → I↑ → AD shifts RIGHT → P↑, Y↑ — the classic expansionary transmission result. (Pre-verified.) Contractionary monetary policy would reverse every arrow in this chain.

Q18 (Multiple answer — select all that apply) — Fiscal vs. monetary policy. Which of the following are tools of MONETARY policy (wielded by the Federal Reserve), as opposed to fiscal policy (wielded by Congress)? Select all that apply.
- A. Congress raising government spending on infrastructure
- B. The Federal Reserve lowering the discount rate ✅
- C. The Federal Reserve buying government bonds on the open market ✅
- D. Congress cutting the personal income tax rate
- E. The Federal Reserve raising the reserve requirement for banks ✅
Feedback: Monetary policy is wielded by the Federal Reserve — the discount rate (B), open-market operations (C), and the reserve requirement (E) are all monetary tools. A and D are FISCAL policy tools, wielded by Congress (government spending and tax rates) — a completely different institution with a completely different toolkit. Confusing fiscal and monetary policy — and which body wields which tool — is one of the term's most consequential mix-ups.

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Objective 8 — The Phillips Curve, the Quantity Theory & the Open Economy (Weeks 12–14)

Q19 (MC) — MV = PQ. In an economy, the money supply M = 600, velocity V = 5, and real output Q = 1,200. What is the current price level P, and what happens to P if the money supply rises by 10% (holding V and Q fixed)?
- A. P = 5; rises to 5.5
- B. P = 2.5; rises to 2.75 ✅
- C. P = 2.5; rises to 2.6
- D. P = 5; stays at 5 (money is neutral in all cases)
Feedback: MV = PQ → PQ = 600 × 5 = 3,000; P = PQ ÷ Q = 3,000 ÷ 1,200 = 2.5. A 10% rise in M (to 660) with V and Q fixed raises P proportionally: new P = (660 × 5) ÷ 1,200 = 2.75 (a 10% rise — long-run neutrality). (Pre-verified.) D is wrong: money is neutral in the LONG run specifically (with V and Q fixed) — it still directly raises P here.

Q20 (MC) — Short-run vs. long-run Phillips curve. Which of the following correctly describes the relationship between the short-run and long-run Phillips curves?
- A. Both the short-run and long-run Phillips curves slope downward, showing a permanent tradeoff between inflation and unemployment
- B. The short-run Phillips curve slopes downward, but the long-run Phillips curve is vertical at the natural rate of unemployment — there is no permanent tradeoff ✅
- C. The long-run Phillips curve slopes downward more steeply than the short-run curve
- D. The short-run Phillips curve is vertical, while the long-run curve slopes downward
Feedback: In the short run, lower unemployment can come with higher inflation (a downward-sloping SRPC). In the long run, the Phillips curve is vertical at the natural rate — unemployment returns to its natural rate regardless of the inflation rate, so there is no permanent tradeoff. Treating the short-run tradeoff as if it holds forever is the classic error this item targets.

Q21 (MC) — Comparative advantage. Eastland can produce 5 units of wheat OR 2.5 units of cloth per worker-day. Westbay can produce 8 units of wheat OR 2 units of cloth per worker-day. Which country has the comparative advantage in CLOTH?
- A. Westbay, because it produces more wheat overall (absolute advantage)
- B. Eastland, because its opportunity cost of 1 unit of cloth (2 wheat) is lower than Westbay's (4 wheat) ✅
- C. Neither country has a comparative advantage, since Westbay has the absolute advantage in wheat
- D. Westbay, because it can produce cloth in less total labor time
Feedback: Eastland's opportunity cost of 1 cloth = 5 ÷ 2.5 = 2 wheat. Westbay's opportunity cost of 1 cloth = 8 ÷ 2 = 4 wheat. Eastland's cost (2) is lower than Westbay's (4) → Eastland has the comparative advantage in cloth. (Pre-verified.) Westbay actually has the absolute advantage in wheat (8 > 5) and the comparative advantage in wheat as well (its opportunity cost of wheat, 0.25 cloth, is lower than Eastland's 0.5 cloth) — comparative advantage is about opportunity cost, never raw output.

Q22 (MC) — Exchange rates & net exports. The exchange rate moves from $1 = 110 pesos to $1 = 95 pesos. What has happened to the dollar, and what is the likely effect on U.S. net exports (holding everything else constant)?
- A. The dollar has appreciated; U.S. net exports rise, because U.S. goods become cheaper abroad
- B. The dollar has depreciated; U.S. net exports rise, because U.S. goods become cheaper abroad and foreign goods become more expensive at home ✅
- C. The dollar has appreciated; U.S. net exports fall
- D. The dollar has depreciated; U.S. net exports fall
Feedback: Since $1 now buys FEWER pesos (110 → 95), the dollar has depreciated (the peso has appreciated against the dollar). A weaker dollar makes U.S. exports cheaper for foreign buyers and imports more expensive for U.S. buyers, so net exports tend to rise. (Pre-verified.) A and C reverse the appreciation/depreciation direction — always check whether a dollar buys MORE (appreciation) or LESS (depreciation) foreign currency than before.

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Synthesis — Schools of Thought & Agreed Ground (Objective 1 / Week 15)

Q23 (Matching) — Schools of thought → claim. Match each school of macroeconomic thought to the claim it is most associated with. (These items test what each school CLAIMS — not which school is "right.")
| School | Correct associated claim |
|---|---|
| Keynesian | Wages and prices are sticky in the short run, so economies can sit in a recessionary gap; active fiscal/monetary stabilization can help close it |
| Classical / monetarist | Prices adjust given enough time, and policy operates with long and variable lags, so steady rules tend to beat discretionary fine-tuning |
| Both schools agree | The long-run Phillips curve is vertical, and sustained high inflation is, in the long run, a monetary phenomenon |
Feedback: Keynesians emphasize short-run price stickiness and a role for active stabilization policy. Classical/monetarist economists emphasize that prices adjust over time and that lags make discretionary policy risky, favoring rules over discretion. Both schools accept certain agreed-ground positive results — like the vertical long-run Phillips curve — even though they differ sharply on how quickly the long run arrives and what policy should do in the meantime. This item is a positive exercise in correctly reporting each school's position, not a verdict on which is correct.

Q24 (T/F) — Deficit vs. debt misconception check. True or False: If a government runs a budget deficit this year, that deficit REDUCES the national debt.
- True
- False ✅
Feedback: False. A deficit (spending exceeds revenue) ADDS to the national debt — it does not reduce it. Only a budget surplus (revenue exceeds spending) reduces the debt. The deficit is a flow (measured over one year); the debt is a stock (the running cumulative total).

Q25 (T/F) — Long-run Phillips curve (agreed ground). True or False: The claim that the long-run Phillips curve is vertical at the natural rate of unemployment is agreed ground between Keynesian and classical/monetarist economists — it is not a contested, both-sided normative question.
- True ✅
- False
Feedback: True. Unlike genuinely contested questions (how fast the economy self-corrects, whether to use active stabilization policy), the vertical long-run Phillips curve is a well-established positive result accepted across the major schools of macroeconomic thought — it is not "both-sided" the way a value-laden policy debate is.

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Answer Key (quick reference)

Q	Answer	Q	Answer
1	B (3 consumer goods per capital good)	14	B (medium of exchange / unit of account / store of value)
2	False (normative "should" statement)	15	B (r falls 8%→7% after Fed buys)
3	C ($1,170B GDP; NX = −30)	16	buy→MS↑r↓ / sell→MS↓r↑ / RR↑→MS↓r↑ / IOR↑→MS↓r↑
4	C (deflator = 125)	17	B (ΔY=$110B; AD right; P↑Y↑)
5	B (CPI=117.5; inflation=17.5%)	18	B, C, E (monetary = the Fed)
6	B (u-rate 4%; LFPR 62.5%)	19	B (P=2.5; rises to 2.75)
7	B (growth 9%; ≈7.8 years to double)	20	B (SR slopes down; LR vertical)
8	B (Y*=1,900, P*=17.5)	21	B (Eastland has CA in cloth; OC 2<4)
9	B (recessionary gap $75B, 5%)	22	B (dollar depreciated; NX rises)
10	right/left/right/left, as above	23	Keynesian→sticky/activism / Classical→lags/rules / Both→vertical LRPC
11	C ($175B — mult. of 5)	24	False (deficit adds to debt)
12	B ($1,160B new debt)	25	True (vertical LRPC = agreed ground)
13	B (reserves $200; loan $1,800; max $20,000)

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Quality Gate (self-checked)

• Structure: 25 items, 4 points each, 100 points total. Objective coverage: Obj 1 = 2 (Q1, Q2) · Obj 2 = 2 (Q3, Q4) · Obj 3 = 2 (Q5, Q6) · Obj 4 = 1 (Q7) · Obj 5 = 3 (Q8, Q9, Q10) · Obj 6 = 3 (Q11, Q12, Q24) · Obj 7 = 6 (Q13–Q18) · Obj 8 = 5 (Q19, Q20, Q21, Q22, Q25) · plus Q23 (schools synthesis, tagged to Objective 1 / Week 15) = 25 items total. Coverage is weighted toward Objectives 7–8 (money, banking, the Fed, the Phillips curve, the quantity theory, and the open economy) because the midterm already tested Objectives 1–6 in depth.
• Single-answer integrity: Every MC and T/F item has exactly one correct answer. The multiple-answer item (Q18) has three correct options stated clearly. Both matching items (Q10, Q16, Q23 — three matching items total) pair all rows one-to-one. No ambiguous items.
• Quantitative gate: PASS. Every numeric answer independently re-verified in Python before shipping (_build/logs/week-16-numbers.txt, 87/87 checks): PPF OC 30/10 = 3 consumer goods (Q1); GDP = 700+300+200+(−30) = $1,170B (Q3); deflator = 1,100/880×100 = 125 (Q4); CPI = 94/80×100 = 117.5, inflation = 17.5% (Q5); labor force 96+4=100, u-rate = 4%, LFPR = 62.5% (Q6); growth = 63/700 = 9%, rule of 70 = 70/9 ≈ 7.8 years (Q7); AD-AS new eq Y*=1,900, P*=17.5 (Q8); gap = 1,500−1,425 = $75B = 5% (Q9); multiplier = 1/(1−0.8) = 5, ΔY = 35×5 = $175B (Q11); deficit = 500−440 = $60B, new debt = $1,160B (Q12); required reserves = 2,000×0.10 = $200, first loan = $1,800, max expansion = 2,000×10 = $20,000 (Q13); r falls from 15−700/100=8% to 15−800/100=7% (Q15); ΔY = 22×5 = $110B (Q17); PQ=600×5=3,000, P=2.5, new P at M+10% = 2.75 (Q19); Eastland OC of cloth = 5/2.5=2 wheat < Westbay's 8/2=4 wheat (Q21); dollar depreciated 110→95 pesos per dollar (Q22).
• Graph-logic check: PASS. AD shifts right (expansionary monetary policy) → P↑, Y↑ (Q8, Q17); corporate tax cut → AD right; input-cost shock → SRAS left (stagflation); technology advance → LRAS right; confidence drop → AD left (Q10); Fed buys bonds → MS↑, r↓; Fed sells → MS↓, r↑; RR↑ and IOR↑ → MS↓, r↑ (Q15, Q16); full transmission chain MS↑→r↓→I↑→AD right→P↑,Y↑ (Q17); SRPC slopes down, LRPC vertical at the natural rate (Q20, Q25); dollar depreciation → NX rises (Q22).
• Integrity vs. practice final: 0 items are shared with O-practice-final-week-16.md (verified by full stem comparison — every concept slot uses a different scenario, different engineered numbers, and different wording on the practice form; see O's own Quality Gate section for the full item-by-item comparison).
• Integrity vs. the Week 8 midterm and weekly quizzes: 0 items are shared. Every quantitative pocket on this Final uses numbers that differ from the midterm's and every weekly quiz's engineered values (e.g., this Final's PPF ratio is 30/10 = OC 3, vs. the midterm's 18/6 = OC 3 coincidentally-equal-but-independently-engineered scenario with different endpoints; this Final's GDP components (700/300/200/140/170) differ from the midterm's (600/250/175/120/90) and every weekly quiz's; the deflator pair (1,100/880), the CPI basket (notebooks/pens), the unemployment figures (160M/96M/4M), the AD-AS system (P=24−Y/200 / P=8+Y/200), the output gap (1,500/1,425), the multiplier scenario (MPC 0.8, ΔG=35), the deficit/debt figures (440/500/1,100), the money-multiplier scenario (RR 10%, deposit $2,000), the money-market system (r=15−M/100, M=700→800), the transmission scenario (ΔI=22, mult=5), the MV=PQ system (M=600,V=5,Q=1,200), the comparative-advantage pair (Eastland/Westbay), and the exchange-rate pair ($1=110→95 pesos) are all FRESH scenarios engineered specifically for this Final, none copied from any Week 1–15 quiz, workshop, or the Week 8 midterm/practice exam).
• Auto-gradable only: All items are MC, MA, matching, or T/F — no free-text, no free-entry numeric items. Every described graph and curve shift is stated in words.
• Contested-question discipline: Q23 (schools of thought) and Q2/Q24 (positive vs. normative) test what each position claims, never which side is right; no verdict is embedded in any item or its feedback.
• Fictional identity confirmed: Silver Oak University, Prof. Ashford, ECON 2, Fall 2026. No fabricated quotes, invented statistics, or real-institution implications anywhere in the exam.
• QTI parse confirmation: L-final-week-16-qti.xml generated by build_qti.py — prints "25 items, parses clean."

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Canvas Placement Block

canvas_object              = Quizzes::Quiz
title                      = "Final Exam — Cumulative (Weeks 1–15)"
assignment_group           = "Final"
points_possible            = 100
grading_type               = points
available_from_offset_days = 0        # opens Mon Dec 14 (Week 16 module opens)
due_offset_days            = 6        # due six days later (Sun Dec 20)
published                  = true
allowed_attempts           = 1
shuffle_answers            = true
ai_permitted               = false
provenance                 = "~ Prof. Ashford's edition · Fall 2026 · built with thecoursemaker.com"