ECON 110 BYU MIDTERM 4 EXAM QUESTIONS
WITH CORRECT ANSWERS 2026/2027
Inclusive Institutions - CORRECT ANSWER --Encourage broad participation
- Protect property rights
- Equal opportunity for economic Advancement
Extractive Institutions - CORRECT ANSWER -- Exclude people from participating
- restrict property rights
- Allow elites to extract rents from others
Rule of 72 - CORRECT ANSWER -72/Interest rate=Years to double
Growth Factors - CORRECT ANSWER -Resources
Technology
Savings and Investment
Education and Health
Stable Governance
Free Trade
Research and Development
Catch Up Effect - CORRECT ANSWER -Developing nations tend to grow faster than advanced
nations, allowing them to narrow the income gap
AD: The Wealth Effect - CORRECT ANSWER -Price Level rises:
- the cash you already have is worth less
- You buy less (C decreases)
, Price level falls:
- The cash you already have is worth more
- You buy more (C increases)
AD: The Interest Rate Effect - CORRECT ANSWER -Price level rises:
- wealth effect: your dollars are worth less, so you have to spend more of them for same
amount of good
- you save less, so banks have less money to loan out
- interest rates rase and businesses take fewer loans (I decreases)
Price level falls:
- Wealth effect: your dollars are worth more so you have to spend less of them to get the same
amount of good
- you save more, so banks have more money to loan out
- interest rates fall and businesses take more loans (I increases)
AD: The Exchange Rate Effect - CORRECT ANSWER -Price Level Rises:
- interest rate effect: US interest rates rise
- Foreign investors want to invest, so they buy dollars
- Demand for dollars increases, so dollars appreciate
- fewer people buy dollars to purchase US exports (NX decreases)
Price level falls:
- interest rate effect: US interest rate falls
- Foreign investors don't want to invest, buy fewer dollars
- demand for dollars decreases, dollars depreciate
- more people buy dollars to purchase US exports (NX increases)
SRAS: Sticky Wages - CORRECT ANSWER -Price level rises:
WITH CORRECT ANSWERS 2026/2027
Inclusive Institutions - CORRECT ANSWER --Encourage broad participation
- Protect property rights
- Equal opportunity for economic Advancement
Extractive Institutions - CORRECT ANSWER -- Exclude people from participating
- restrict property rights
- Allow elites to extract rents from others
Rule of 72 - CORRECT ANSWER -72/Interest rate=Years to double
Growth Factors - CORRECT ANSWER -Resources
Technology
Savings and Investment
Education and Health
Stable Governance
Free Trade
Research and Development
Catch Up Effect - CORRECT ANSWER -Developing nations tend to grow faster than advanced
nations, allowing them to narrow the income gap
AD: The Wealth Effect - CORRECT ANSWER -Price Level rises:
- the cash you already have is worth less
- You buy less (C decreases)
, Price level falls:
- The cash you already have is worth more
- You buy more (C increases)
AD: The Interest Rate Effect - CORRECT ANSWER -Price level rises:
- wealth effect: your dollars are worth less, so you have to spend more of them for same
amount of good
- you save less, so banks have less money to loan out
- interest rates rase and businesses take fewer loans (I decreases)
Price level falls:
- Wealth effect: your dollars are worth more so you have to spend less of them to get the same
amount of good
- you save more, so banks have more money to loan out
- interest rates fall and businesses take more loans (I increases)
AD: The Exchange Rate Effect - CORRECT ANSWER -Price Level Rises:
- interest rate effect: US interest rates rise
- Foreign investors want to invest, so they buy dollars
- Demand for dollars increases, so dollars appreciate
- fewer people buy dollars to purchase US exports (NX decreases)
Price level falls:
- interest rate effect: US interest rate falls
- Foreign investors don't want to invest, buy fewer dollars
- demand for dollars decreases, dollars depreciate
- more people buy dollars to purchase US exports (NX increases)
SRAS: Sticky Wages - CORRECT ANSWER -Price level rises:
