Advertisement
Not a member of Pastebin yet?
Sign Up,
it unlocks many cool features!
- 1. With respect to the unemployment problem, Keynesian economists generally take the
- position that
- A) government should guarantee each person a satisfying and high-paying job.
- B) government should eliminate only frictional unemployment.
- C) involuntary unemployment can result if wages do not adjust quickly to clearly
- equate labour demand and supply.
- D) individuals should be responsible for finding their own jobs.
- 2. Per capita real output is a
- A) better measure of personal material consumption than real GDP.
- B) worse measure of personal material consumption than real GDP.
- C) better measure of the physical environment than real GDP.
- D) worse measure of the physical environment than real GDP.
- 3. Use the following table to calculate the unemployment rate. Select the correct answer
- from the options below.
- In millions
- Population (age 15+) 270
- People incapable of working 70
- People not looking for work 60
- Employed workers 133
- A) 3 percent.
- B) 5 percent.
- C) 7 percent.
- D) 9 percent.
- 4. Inflationary expectations are important because widespread changes in inflationary
- expectations affect
- A) the distribution of income.
- B) relative prices.
- C) actual inflation.
- D) unexpected inflation.
- 5. The business cycle consists of several stages or phases. Which is the accurate sequence?
- A) Recession, peak, expansion, trough.
- B) Recession, peak, trough, expansion.
- C) Recession, expansion, peak, trough.
- D) Recession, trough, expansion, peak. Page 2
- 6. During the business cycle, an economic expansion occurs
- A) at the peak of the business cycle.
- B) at the trough of a business cycle.
- C) between the peak and trough.
- D) between the trough and peak.
- 7. Food and beverages make up about 20 percent of total expenditure. If food and beverage
- prices rise by 10 percent while the other components of the price index remain constant,
- how much will the price index rise by?
- A) 1 percent.
- B) 2 percent.
- C) 20 percent.
- D) 25 percent.
- 8. Radical economists
- A) are generally in agreement with Austrian economists.
- B) believe that individual liberty takes precedence over social equality.
- C) do not emphasize social problems related to race or class.
- D) believe that capitalism benefits a small elite at the expense of workers.
- 9. A cost of inflation is that
- A) it makes everyone poorer.
- B) it makes the poor poorer and the rich richer.
- C) there are no costs of inflation because inflation does not make the society as a
- whole poorer.
- D) it reduces the informational content of prices.
- 10. Mexico can produce vine-ripened tomatoes at a lower opportunity cost than firms in the
- United States. Through negotiations the United States lifted quotas limiting the import
- of tomatoes from Mexico. Some firms in Florida, in the face of this new competition,
- had to close their farms and layoff their workers. Many of the workers could not find
- new jobs right away. What type of unemployment describes the workers' situation?
- A) Cyclical unemployment.
- B) Full unemployment.
- C) Structural unemployment.
- D) Frictional unemployment. Page 3
- 11. Post-Keynesian macroeconomists
- A) reject Keynes' ideas about fiscal and monetary policy.
- B) favour a fixed rate of growth for the money supply.
- C) believe that government intervention is justified by uncertainty about the
- macroeconomy.
- D) believe that laissez-faire is justified by uncertainty about the macroeconomy.
- 12. If country of 250 million people has a total income of $8 trillion, its per capita income is
- about
- A) $32.00.
- B) $32,000.00.
- C) $320.00.
- D) $36,000.00.
- 13. Which of the following is NOT a measurement problem with the Consumer Price
- Index?
- A) Substitution bias.
- B) Quality improvement bias.
- C) Quality decline bias.
- D) New product bias.
- 14. Which of the following institutional changes would tend to reduce the target rate of
- unemployment?
- A) The greater ease with which families may support unemployed family members.
- B) Increased number of people reaching the age at which they are more employable.
- C) The availability of unemployment insurance.
- D) The increased incidence of two-earner families.
- 15. In the late 1990s, the economy was experiencing a prolonged expansion and the
- unemployment rate fell to near 4 percent. Companies had a hard time finding workers.
- What type of unemployment was declining during this period?
- A) Cyclical unemployment.
- B) Full unemployment.
- C) Structural unemployment.
- D) Frictional unemployment.
- 16. Which of the following people would be included as a member of the labour force?
- A) A full-time college student.
- B) A recent high school graduate looking for a first job.
- C) A homemaker contributing 15 hours per week as a volunteer worker in a hospital.
- D) A retired school teacher collecting a pension.
- 17. Which of the following problems is not one of the central concerns of macroeconomics?
- A) Product pricing.
- B) Growth.
- C) Business cycles.
- D) Unemployment. Page 4
- 18. If the CPI in year 2 equals 110 and the CPI in year 3 equals 121, it can be concluded
- that consumer prices
- A) rose from year 2 to year 3 by 11.
- B) rose from year 2 to year 3 by 11%.
- C) rose from year 2 to year 3 by 10%.
- D) are the same in year 2 as in the base year.
- 19. Some people have argued that the dual goals of environmental protection and increasing
- material consumption by individuals are not necessarily conflicting because spending on
- the environment creates growth and jobs. This argument
- A) is correct because jobs are a good thing.
- B) is incorrect because environmental issues are not as important as material
- consumption.
- C) is correct because material consumption is not as important as the environment.
- D) is incorrect because the environmental projects will use the resources generated
- from growth, leaving less for increased personal consumption.
- 20. If the price of housing (which accounts for 40% of total expenditures in the CPI basket),
- rises by 5% in one year while the prices of all other goods remain constant, by how
- much will the CPI rise?
- A) 2 percent.
- B) 5 percent.
- C) 10 percent.
- D) 40 percent.
- 21. Which of the following is not a part of GDP?
- A) The value of a homemaker's services.
- B) The value of a haircut.
- C) The value of a new car produced and purchased during a year.
- D) The value of new houses built and sold during a year.
- Use the following to answer question 22:
- In billions of dollars
- Consumption 3,600
- Investment 800
- Transfer payments 750
- Government expenditures 1,000
- Exports 650
- Imports 450
- Net foreign factor income -30
- 22. Calculate GNI using the table above.
- A) 5,570.
- B) 5,630.
- C) 6,220.
- D) 6,250. Page 5
- 23. The largest component of national income is
- A) interest.
- B) rents.
- C) employee compensation.
- D) profits.
- 24. If inflation is 10 percent and nominal GDP goes up 20 percent, real GDP goes up
- approximately
- A) 1 percent.
- B) 10 percent.
- C) 20 percent.
- D) 30 percent.
- 25. Which of the following is not a limitation of national income accounting?
- A) Measurement error.
- B) The use of real GDP to measure changes in economic activity over time.
- C) The use of real GDP to measure changes in social welfare over time.
- D) Misinterpretation of subcategories.
- 26. The movement of expenditures and factor payments through the economy is called
- A) net national product.
- B) national income.
- C) gross domestic product.
- D) the circular flow.
- 27. For the purposes of calculating GDP, gross private domestic investment includes
- A) the value of new residential construction.
- B) purchases of stock.
- C) purchases of new automobiles.
- D) purchases of government bonds.
- 28. Value added is calculated by
- A) subtracting the cost of materials used in production from the value of sales.
- B) adding the cost of materials used in production to the value of sales.
- C) subtracting the value of sales from the cost of materials used in production.
- D) adding the value of output to the value of inputs.
- 29. If economic activity increases, it follows that economic welfare
- A) increases as more goods and services become available.
- B) decreases as more resources are depleted.
- C) does not change since it does not depend on the level of economic activity.
- D) may increase, decrease, or remain unchanged, depending on the nature of the
- increase in economic activity. Page 6
- 30. There are two firms in an economy, Firm A and Firm B. Firm A produces 100 widgets
- and sells them for $2 apiece. Firm B produces 200 gadgets and sells them for $3 apiece.
- Firm A sells 30 of its widgets to Firm B and the remainder to consumers. Firm B sells
- 50 of its gadgets to Firm A and the remainder to consumers. What is GDP in this
- economy?
- A) $210.
- B) $590.
- C) $600.
- D) $800.
- Use the following to answer question 31:
- In trillions of dollars
- GDP 5.0
- Government purchases 1.0
- Transfer payments 0.2
- Exports 0.4
- Imports 0.5
- Net foreign factor income 0.4
- 31. Refer to the table above. What is consumption in this economy?
- A) $3.6 trillion.
- B) $3.9 trillion.
- C) $4.1 trillion.
- D) There is not sufficient information to compute consumption.
- 32. Suppose that between 1999 and 2000, real GDP rose by 10%, inflation was 10%, and
- average product quality increased by 10%. From this we can infer that
- A) the true increase in real GDP is likely to be less than 10%.
- B) the true increase in real GDP is likely to be greater than 10%.
- C) the true increase in real GDP is likely to be 10%.
- D) real GDP probably did not change.
- 33. If depreciation does not occur, then
- A) net domestic product exceeds gross domestic product.
- B) net domestic product equals gross domestic product.
- C) net domestic product is less than gross domestic product.
- D) net domestic product cannot be defined.
- 34. Canada produces and sells millions of different products. To add them up to a single
- aggregate number, each good is weighted by its
- A) cost of production.
- B) market price.
- C) utility to consumers.
- D) contribution to corporate profits. Page 7
- 35. To calculate GDP
- A) add the quantity of all final goods and services produced in an economy in a year.
- B) add the quantity of all goods and services sold in an economy in a year.
- C) weight the output of each final good and service produced in an economy in a year
- by its price in that year and then add the result.
- D) weight the output of each good and service produced in an economy in a year by its
- price in that year and then add the results.
- 36. According to the multiplier equation, an increase in the marginal propensity to consume
- A) raises output because it leads to an increase in autonomous expenditure.
- B) reduces aggregate expenditure because it reduces the multiplier.
- C) increases output because it increases the multiplier.
- D) increases aggregate expenditure because it increases autonomous expenditure.
- 37. In Canada suppose the marginal propensity to consume is 0.8 and the tax rate is 0.25
- and all other components of aggregate expenditures are determined outside the model. If
- the Prime Minister wants to increase income by 500, his advisers would suggest that he
- increase government spending by
- A) 50.
- B) 100.
- C) 200.
- D) 250.
- 38. If an increase in autonomous expenditure of $300 results in an increase in equilibrium
- income of $900, the multiplier is
- A) 1/3.
- B) 3.
- C) 4.
- D) 5.
- 39. The multiplier equals
- A) the mpc.
- B) 1 / mpc.
- C) 1 / (1 - mpc).
- D) 1 / (mpc - 1).
- 40. In the expenditures function AE = AE0 + mpcY, induced expenditures are given by
- A) AE0.
- B) AE0 + Y.
- C) mpcY.
- D) Y.
- 41. According to the expenditures function, what happens to expenditures as income rises?
- A) They stay the same.
- B) They decrease.
- C) They increase by the same amount as income.
- D) They increase by less than the increase in income. Page 8
- 42. The aggregate expenditure model
- A) fully explains fluctuations in equilibrium income.
- B) explains the link between fluctuations in autonomous expenditure and fluctuations
- in equilibrium income.
- C) explains why autonomous expenditures change.
- D) can be used to determine the desired level of income.
- 43. The total level of expenditures in an economy equals
- A) C + I + G + IM.
- B) C + I + G - IM.
- C) C + I + G + X.
- D) C + I + G + X - IM.
- Use the following to answer questions 44 – 46 :
- 44. Refer to the graph above. If the mpc were to change to .9, equilibrium real income
- would be
- A) greater than $600.
- B) $600.
- C) less than $600.
- D) indeterminate.
- 45. Refer to the graph above. If the mpc were to change to 1/3, equilibrium real income
- would be
- A) greater than $600.
- B) $600.
- C) less than $600.
- D) indeterminate. Page 9
- 46. Refer to the graph above. If autonomous expenditures were to change to $300,
- equilibrium real income would be
- A) greater than $600.
- B) $600.
- C) less than $600.
- D) indeterminate.
- 47. Classical economists thought that the Depression in the 1930s lasted so long because
- A) wage-levels were rigid.
- B) wages were too low.
- C) people were unwilling to work.
- D) inflation was too low.
- 48. In the aggregate expenditure model if autonomous exports fall by 40 and government
- spending increases by 20, and the mpc is .5, what happens to the income?
- A) Income rises by 120.
- B) Income falls by 120.
- C) Income rises by 40.
- D) Income falls by 40.
- Use the following to answer question 49 :
- 49. Refer to the graph above. Point A represents
- A) real income of $3,000 and real production of $3,000.
- B) real income of $3,000 and real production of $5,000.
- C) real income of $5,000 and real production of $5,000.
- D) real income of $5,000 and real production of $3,000.
- 50. Aggregate production is the total amount of
- A) goods produced.
- B) services produced.
- C) expenditures.
- D) goods and services produced. Page 10
- THIS PAGE SHOULDBE BLANKPage 11
- Fall 2007 – Dr. Mueller – Econ 1012A – Midterm One – Answer Key
- 1. C
- 2. A
- 3. B
- 4. C
- 5. D
- 6. D
- 7. B
- 8. D
- 9. D
- 10. C
- 11. C
- 12. B
- 13. C
- 14. B
- 15. A
- 16. B
- 17. A
- 18. C
- 19. D
- 20. A
- 21. A
- 22. A
- 23. C
- 24. B
- 25. B
- 26. D
- 27. A
- 28. A
- 29. D
- 30. B
- 31. D
- 32. B
- 33. B
- 34. B
- 35. C
- 36. C
- 37. C
- 38. B
- 39. C
- 40. C
- 41. D
- 42. B
- 43. D
- 44. A
- 45. C
- 46. A
- 47. A Page 12
- 48. D
- 49. A
- 50. D
Advertisement
Add Comment
Please, Sign In to add comment
Advertisement