Rubric for– exam 1 – econ 004 – Chuderewicz
Cruise ship essay (50 points total)
A) 20 pts.
All of these had to be LABELED in the drawing:
2 pts- Monetary Policy Wheel
2 pts- Fiscal Policy Wheel
2 pts- Rocks of Recession
2 pts- Rocks of OVERHEATING
10 pts- PCE Core/Inflation, PGE/GDP, UR/NAIRU and also the PERCENTS for all of
them
2 pts- Explain what the port is. You just had to say SOMETHING in reference to the
drawing and the port.
B) 5 pts.- Cannot simply restate that the two wheels are MP and FP
1 pt.- MP is controlled by Fed/Bernanke
1 pt.- MP adjusts interest rates (ir)
1 pt.- FP is controlled by the government (congress/senate/policy makers)
1 pt.- FP adjusts taxes (deals with rebates, tax cuts, etc)
1 pt.- FP also adjusts government expenditures/purchases/spending
C) 15 pts.- Had to say what BOTH monetary policy AND fiscal policy are doing
Must state that:
- We are heading into a recession
- MP is lowering interest rates
- The goal of this is to get people to spend rather than save, thus stimulating the
economy
- FP recently passed a stimulus plan of offering tax rebates
- The goal of this is to stimulate the economy by giving people more disposable
income
Extra points: If you stated the dates on which the Fed lowered basis points and by how
many basis points.
D) 10 pts.
There are TWO parts to this question
Part A: Why is policy hard to conduct? (5 pts)
- Because of lags, an unpredictable future, relying on previous information/data, etc, it’s
difficult to make completely accurate adjustments for the future. Something to that
extent.
Part B: Explain why we’re between a rock and a hard spot (5 pts)
- Because the Fed is cutting interest rates, but they also have to worry about fighting
inflation if they continue to cut the interest rates.
A TIP: For the next exam, remember to answer EVERY question! The answer
doesn’t necessarily have to be long for each one, but it needs to be there.
Rubric for Four of Diamonds essay (25 points total)
Description of price index/ what price indices are used for
5 points
How do price indices relate to inflation/what is held constant?
10 points
3 pts – % change in price index over time = inflation
3 pts – Inflation is increase in prices (the cost of a given level of satisfaction) over time
4 pts- Level of Satisfaction/goods held constant
Price indices for Clarion, Sullivan, and Westmoreland counties 5 points
Clarion = 85
Sullivan = 75
Westmoreland = 100
True/False with explanation
5 points
2 pts – False
3 pts – correct explanation
Rubric for Seven of Diamonds essay –(25 points total)
Real rate of interest at beginning of 2002
3 pts - .58 %
2 pts – work shown
Real rate of interest at beginning of 2003
3 pts - -.86 %
2 pts – work shown
Source of the movement
5 points
5 points
5 points
What would Fed have to do to stabilize real rates
5 points
Raise interest rates
Under what conditions would Fed want to keep real rates at .58%
5 points
If the Fed were worried about overheating – something along these lines