Choose any TWO questions. Answers should be typed double spaced, 12pt font. 1” margins.
1. Keynes economic theory was developed in large part as response to the apparent failure of the Classical economic theory during the Great Depression. Explain Keynes’ four main criticisms of classical economic theory.
2. List and describe the six categories of economic exchanges that are omitted from GDP calculations. Explain why these transactions are not included in GDP and give an example of each to help support your answer.
3. a. Explain with the use of examples the following definitions of unemployment. Highlight any relationships that may exist between them
i. Frictional Unemployment;
ii. Structural Unemployment;
iii. Cyclical Unemployment;
iv. Natural Unemployment.
b. Explain what is meant by full employment in macroeconomics and explain why the unemployment rate might well be greater than zero at full employment.
4. Discuss the dangers of inflation; that is, why may it hurt an economy?