Midterm2ExamWinter09 Econ2

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MULTIPLECHOICE.Choosetheonealternativethatbestcompletesthestatementoranswersthequestion. 1) Inabusinesscycle,atroughrepresentstheendof A) arecession. B) aninflation. 1) C) apeak D) anexpansion. 2)

2) Whichofthefollowingwouldbecountedin2003sGDP? A) Thevalueofabondsoldbythefederalgovernment. B) ThevalueofaTVthatwasproducedin2002butnotsolduntil2003. C) Thebonuscheckastockbrokergetsfromhis/hercompanyin2003. D) Thevalueofaloanyoutakein2003. 3) ThesinglelargestexpenditurecomponentinGDPis A) governmentspending. B) investment. C) netexports. D) consumption. 4) Ifthevalueofnetexportsisnegative,then A) importsarezero. C) exportsexceedimports.

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4) B) importsexceedexports. D) exportsequalimports.

RefertotheinformationprovidedinTable6.8belowtoanswerthequestionsthatfollow. Table6.8 Production Year1 Year2 Year3 75 100 GoodX 50 100 130 GoodY 100

Prices Year1 Year2 $1.00 $1.00 $0.60 $0.75

Year3 $1.20 $1.00 5)

5) RefertoTable6.8.AssumethatthiseconomyproducesonlytwogoodsGood X andGoodY.If year1isthebaseyear,thevalueforthiseconomysrealGDPinyear2is A) $140. B) $135. C) $180. D) Noneoftheabove 6) RefertoTable6.8.AssumethatthiseconomyproducesonlytwogoodsGood X andGoodY.If year1isthebaseyear,thevalueforthiseconomysGDPdeflatorinyear2is A) 88.9. B) 111. C) 112.5. D) 100. 7) TheGDPdeflatorinyear2is110andtheGDPdeflatorinyear3is118.Therateofinflation betweenyears2and3is A) 4.55%. B) 7.27%. C) 8%. D) 18%. 8) Legalizingallformsofillegalactivitieswould A) reducethesizeoftheundergroundeconomyandincreasemeasuredGDP. B) reduceboththeundergroundeconomyandmeasuredGDP. C) increasethesizeoftheundergroundeconomyandreducemeasuredGDP. D) reducemeasuredGDP.

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9) Whichofthefollowingcausestheunemploymentratetounderstatethetrueextentofjoblessness? A) Discouragedworkersarenotcountedasunemployed. B) Adrugdealerreportsherselfasunemployed. C) Personswhocollectunemploymentbenefitsreportthemselvestobesearchingforajob. D) Manyfulltimeworkersreallywanttobeparttimeworkers. E) Discouragedworkersarecountedasunemployed. 10) Whichofthefollowingisanexampleofaworkerexperiencingcyclicalunemployment? A) Anassemblylineworkerwholoseshisjobbecauseofautomation. B) Aworkerquitshisjobbecausehedoesnotgetalongwithhisboss. C) Aworkerthatchangesjobstomovecloserherfamily. D) AFreightlineremployeethatgotlaidoffbecauseoftherecessionof2001. E) Alifeguardwhowashiredduringthesummerseasonislaidoffaftersummerisover. Table8-1 Year 2004 2005 CPI (1982 -1984 =100) 175 180

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11) RefertoTable8-1.Supposethatthedatainthetableabovereflectpricelevelsintheeconomy. Whatistheinflationratebetween2004and2005? A) 2.9% B) 4.6% C) 3.5% D) 7.5% E) 5% 12) Whenthepriceofgasolinerises,someconsumersbeginridingtheirbikesmorefrequentlyor ridingthebusinsteadofdrivingtheircar.ThefactthattheCPIdoesnotfullyaccountforsuch changesinconsumerbehavioriscalled A) outletbias. B) substitutionbias. C) increaseinqualitybias. D) discriminationbias. Table8-7 Year 2001 2002 2003 NominalAverage HourlyEarnings($) $10 10 12 CPI (1982 -1984 =100) 100 105 110

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13) RefertoTable8-7.Lookingatthetableabove,realwages________from2001to2002,andreal wages________from2002to2003. A) rose;fell B) fell;fell C) fell;rose D) rose;rose 14) Youlend$5,000toafriendforoneyearatanominalinterestrateof10%.TheCPIoverthatyear risesfrom180to190.Whatistherealrateofinterestyouwillearn? A) 5.5% B) 5.8% C) 4.4% D) 0%

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15) Whenpricesarerising,whichofthefollowingwillbetrue? A) Therealinterestratewillbelowerthanthenominalinterestrate. B) Thenominalinterestratewillbenegative. C) Therealinterestratewillbenegative. D) Therealinterestratewillbehigherthanthenominalinterestrate. 16) Anincreaseinpublicsavingshaswhatimpactonthemarketforloanablefunds? A) Thesupplyofloanablefundsincreases. B) Thedemandforloanablefundsdecreases. C) Thedemandforloanablefundsincreases. D) Thesupplyofloanablefundsdecreases. 17) Whichofthefollowingwillincreasetherealinterestrate? A) anincreaseinthesupplyofloanablefunds B) anincreaseinthebudgetsurplus C) anincreaseinthedemandforloanablefunds D) anincreaseinhouseholdsavings 18) Duringanexpansion,howdoinflationandunemploymenttypicallychange? A) Inflationfallsandunemploymentrises. B) Inflationandunemploymentbothrise. C) Inflationandunemploymentbothfall. D) Inflationrisesandunemploymentfalls. 19) Asmalleconomyincreaseditscapitalperhourworked(K/L)from$40,000to$50,000.Asaresult, realGDPperworker(Y/L)grewfrom$20,000to$25,000.Iftheeconomyincreasesitscapitalper hourworkedbyanother$10,000to$60,000,butthereisnochangeintechnology,byhowmuch moreandinwhatdirectionwilloutputperworkerchange? A) Outputperworkerwillincreasebylessthan$5,000. B) Outputperworkerwillfallbymorethan$5,000. C) Outputperworkerwillincreasebyexactly$5,000. D) Outputperworkerwillincreasebymorethan$5,000.

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Figure10 -2

20) RefertoFigure10 -2.Whichofthefollowingcombinationsofpointsillustrateschangesinthe SovietUnionseconomyfrom1950 - 1980? A) AtoBtoC B) BtoE C) EtoB D) BtoD 21) In2001,CiscoSystemswassurprisedbyadeclineindemandfortheirequipment,resultinginan unexpectedincreaseininventories.Thiseventresultedfrom A) spendingthatwasgreaterproduction. B) aggregateexpenditurethatwaslessthanGDP. C) macroeconomicequilibrium. D) aggregateexpenditurethatwasgreaterthanGDP. 22) Aggregateexpenditureincludesspendingon A) C+I+G- NX. C) C+I+G. 23) Macroeconomicequilibriumoccurswhen A) aggregateincome=plannedinventories. B) aggregateexpenditure=GDP. C) aggregateincome=plannedinventories. D) aggregateexpenditure=C + I+ G+ nettransfers. 24) Howdoesadecreaseingovernmentspendingaffecttheaggregateexpenditureline? A) Itshiftstheaggregateexpenditurelinedownward. B) Itincreasestheslopeoftheaggregateexpenditureline. C) Itshiftstheaggregateexpenditurelineupward. D) Itdecreasestheslopeoftheaggregateexpenditureline.

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22) B) C+I+G+NX. D) C+I+depreciation- NX. 23)

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Figure114

25) RefertoFigure114. PotentialGDPequals$100billion.TheeconomyiscurrentlyproducingGDP1 whichisequalto$90billion.IftheMPCis.8,thenhowmuchmustautonomousspendingchange fortheeconomytomovetopotentialGDP? A) $18billion B) - $18billion C) $2billion D) - $2billion 26) Whichofthefollowingisatruestatementaboutthemultiplier? A) Themultiplierisavaluebetweenzeroandone. B) Themultipliereffectdoesnotoccurwhenautonomousexpendituresdecrease. C) ThemultiplierrisesastheMPCrises. D) ThesmallertheMPC,thelargerthemultiplier.

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AnswerKey Testname:UNTITLED1

1) A 2) C 3) D 4) B 5) B 6) B 7) B 8) A 9) A 10) D 11) A 12) B 13) C 14) C 15) A 16) A 17) C 18) D 19) A 20) A 21) B 22) B 23) B 24) A 25) C 26) C

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