sample_EXAM1answers

sample_EXAM1answers - Answers to Exam 1 Fall 1998 Answer...

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1 Answers to Exam 1 Fall 1998 Answer the questions below to the best of your ability. Answer the questions on the test sheet. Answer all parts of each numbered question. You must show all work to receive full credit for your answers to numerical problems. The price associated with all parts of each question (input) is provided so that you may make an informed management decision regarding the production of this exam (output). Be thorough and complete in ALL your responses. Please read and sign the Honor Pledge on the test sheet below or your exam will not be graded: I have neither given or received unauthorized aid on this exam. ___________________________________ _________________________________ Student Name (print please) Student ’s Signature 1. Which of the following would be a topic of microeconomic research : (2 points) a. Is there a tradeoff between unemployment and inflation? b. What is the effect of interest rates on the bond market and stock market? c. What is the profit maximizing level of tobacco production for a farmer? d. Does the federal deficit and national debt drive up nominal interest rates? e. What effect will a decrease in marginal tax rates have on inflation under the current economic conditions of the U.S.? 2. Which statement below is an example of positive economics: (2 points) a. The President's budget for fiscal year 1999 is not in the best interest of the nation. b. A decrease in taxes will increase disposable income, and most likely increase consumption since the typical consumer saves approximately 5% of their disposable income. c. Tobacco producers are getting a raw deal from the federal government. d. U.S. citizens should buy American made products instead of all those imports from foreign countries. e. The whole problem with the U.S. economy is all those folks on welfare. 3. Please define a negative externality and provide a brief example. (2 points) Lecture Series #1, slides 13 to 18
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2 4. Please define a positive externality and provide a brief example. (2 points) Lecture Series #1, slides 19 to 20 5. Please fill in the missing information in the table below, and then calculate the unemployment rate and the employment rate. Data is for December, 1997 . (5 points) Employment Variable Number ( millions ) Civilian Non-Institutionalized Population 205.479 Civilian Labor Force (205.479 - 67.100) 138.379 Employed Population 132.206 Unemployed Population (138.379- 132.206) 6.173 Population Not in Labor Force 67.100 Show all your work for the calculations below: Unemployment Rate = (6.173 / 138.379) x 100 = 4.46% Employment Rate = 100% - 4.46% = 95.54%
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3 6. In 1969, a Whopper without cheese at Burger King had a price of $.45. In 1998, the price of a Whopper without cheese at Burger King was $1.99. In terms of purchasing power, did the price of a Whopper without cheese at Burger King increase or decrease from 1969 to 1998? (Show all of your calculations) (5 points) 1969: $.45 x 4.5033 = $2.026 (1998 dollars) 1998: $1.99 x 1.00 = $1.99
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sample_EXAM1answers - Answers to Exam 1 Fall 1998 Answer...

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