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Unformatted text preview: Econ 102 ~— Wissink — SOB
PRELIM #1 'Multiple Choice Answer Sheet Instructions: Remove this page from the attached pages. Fill in your name and check your TA’s name. Circle opposite each number which of ﬁve possible answers you feel is the correct answer.
Return this sheet with your Em books at the end of the exam. “Juw‘W‘” .
I...» .J ' YOUR NAME: E E i Your C.U. Netid:
Ram TA: Brian CIRCLE ONLY ONE CORRECT ANSWER 1. a b c e
2. b c a e
3. a b c e
4. a b c d e
5. a b d e
6. a c d e
7. a b c d ‘ e
8. I a c d e
9. a c I d e
10. a b c (:1 He
11. a b d e
12. a b c e .r him a graduation present of $1000. Jeff is much younger than Mutt and graduated from cé‘llege 200 Granny sends Jeff the standard graduation check for $1000 along with her love. Jeff maj ored in economics and
informs Granny that she has not been fair since there has been lots of inflation since 1995 Granny, being a
good sport, asks Jeff how much she should give him to make it fair. 1. Ima Granny has two grandchildren, Mutt and Jeff. Mutt graduated from college 1' CGaégﬁgave a. Using the data below, suggest and demonstrate a calculation that Jeff could use to help Granny adjust her gift
for inﬂation. What amount should Granny give Jeff based on this calculation? . ~ s“c
CngEGDPDEJQr'Wﬁg':;ﬂﬂmﬂﬂﬂ§iwinijoa
rang taﬁsreow $ 73mlm7twl y/oo 35 .quwu MMIV1MlM'IIW usuwwmgm. Boyd H l 3 l.\ ﬂ _'
‘la b, ... a) If! I 2:37 Each; erase: Meanings 6? In“? l min m7 b. On her own, the savvy granny ﬁnds this thing called the “Inﬂation Calculator” on the home page for the
Bureau of Labor Statistics. She plugs in the numbers “$1000 in 1995 is worth xxxxx in 2005” and hits
“calculate” and gets back the number $1 ,281 .50. Is this adjustment for inflation smaller or larger than the
number Jeff calculates using the data beloW?
10Vﬁﬂvi lQQLJQ ? alj‘iw
c. (Imnpaimglmggnggﬁt what is going on when you do the calculation Granny’s way as compared to doing it
Jeff’ s way.
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' .. . . i Mi mm. '1 at. l \i‘ 3. mwﬁﬁtﬁf'ﬁikwﬂ‘} kw mic/v.41 “J \i l L 8 2. Consider the following information presented by the government’s statisticians. Assume this is a completely
closed economy and that the economy produces. only two ﬁnal goods, Good X and Good Y. PRODUCITON PRICES
Year 2 Year 3 Year 1 Year 2 Year 3
75 100 $1.00 $1.00 $1.20
100 130 $.60 $.75 $1.00 a. What is the value of this economy’s nominal GDRiarsstl? ‘HWIIMJ—‘mh‘ tutu. u u . Qadxéhod>+two>(péaljiw
. Q? .
50 +— (GORZIHUZK .~.HA_—..m.....r . cs 31" '\ \j
K :3 . W “’1‘
b. What is the value of this economy’s nominal GDP in year 2? I r aw” ‘2’ f "7 C h m + is w“. ..
wwHvavIn 7S” ‘1‘" 7.3”"Blﬁm'iﬁ MWWMMH _iMy“InIIbu‘uvvllrH.‘ﬂd‘—MIIn_n¢w:n...4~m.tnthWunwn.Ihull. c. If theﬁj‘ase year is assumed tobe year 11' What is the value of this economy” real GDP in yearZﬂ a; g _...._._........r.._.._~.
( \i 19% I“ '2, Pt> (7e)ﬁto§)+'ﬂowwc'oélmnm_
' 7n; 4" (a m “#Vi/SB g mmnmmlmmmm “mu d. If the base year is assumed to be year 15 and the price index we use is the implicit GDP deﬂator index, then
what is the value for this economy’ 3 inﬂation rate between year 1 and year 2‘? $399 :33: \‘ilﬁiﬂtrw 1 “:3”: 1 CM?) $/ ‘31:) WW HM?? Giﬁma. ', .m z: W is we 0
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i  HIII‘/OO {m0 ' I ywiﬁ m {{ﬂttﬂ m >( Part III: STOP AND FILL IN THE FOLLOWING BEFORE PROCEEDING: YOUR NAME: Z‘ Your C.U. Netid: TA: Brian Ram Show lots of your work or we can’t give any partial credit in the event that answers are' incorrect. 1. Let L : hours of labor. Let w = the market wage rate. b
Suppose the market demand for labor hours is given by: LD = 1000 — 50w. «7? W 3" QC) "
= 50w. 1&4“ g M mm? W L Suppose the market supply for labor is given by: LS E‘ u {it a. Carefully graph and label the supply and demand curves, putting them in the same graph. as” .2 5:) w. Jim?"
.erw.
l g N “"11 my ("MW {e O aw” «on—“l ‘ awei : “rm Dame mark N w. .
“um” I m”‘m.,ﬂmo«"/ﬂ w“ I
umhrmmmim k4!mil"("W‘HM’ﬂﬂﬁmﬁwmMhﬂwha‘d‘muus‘AWI‘EWHHMMm‘JMJ? A. r “F” a  80C.) 
LI L“: 500 (we
II :3
H00
b. What are the values for the equilibrium quantity, La: oflabor hours and the wage
' t ,. “lbw ﬁrst" L, gm a»
'41 W, I / or“; as w «fiesta :5 3». {Sea}
. HE n _ l and CD 3w" Io c. Indicate L* aﬁd’"W*‘“”‘c‘Sﬁ“ the graph.“ \ , w*, in this labor market? L $1 “Kiwigﬁ'dlﬁfw a? I I
Ii
3. 10 (1. Suppose there is drop in labor demand so that labor demand is now: LD 2 800 —~ 50w. What will be the new
equilibrium quantity of hours and wage in this labor market? funa Wm a to st!» a o it.) ......a o «2% m ' . ' e. If, as Keynes suggested, we have sticky wages, then what exactly will be the economic consequences of a
sticky wage situation when labor demand falls as described in part (d)? im'lilrscxm sit‘lrw w cl a all $3,}..an  .e tan" in) “be P
9 m erg“ a, to Mul— L [‘3 “3w til '“ 513 (/ D>
N‘ I“! ‘ .. m Eject? m so as Z U5 “Elwin u t .wm mmmwmuwmmmm A Wynn+1. u ...s:.Ml\.u.u "mamam M‘s—u «sup. .. w ,i‘
n r. _, ﬂ
~ lo ==~ «9 w 0 t 11 2. Assume that the following set of data completely describes all the production and transactiOns that take place
in the closed economy of Pastaville in the year 2008. Also assume that there are no additional inputs to
production besides those described below. In 2008, Farmer Frank produces 50 pounds of ﬂour, 50 pounds of eggs, and 50 pounds of tomatoes. In 2008, Tubby Tony, a hungry consumer, buys half (25 lbs) of Frank’s eggs at $2 per pound, and he buys half
of Frank’s tomatoes (25 lbs) at $4 per pound. He immediately eats all of the food he buys from Frank. In 2008, Restauratcur Ralph buys the rest of Frank’s output; 50 pounds of ﬂour at $1 per pound, 25 pounds of
eggs at $2 per pound, and 25 pounds of tomatoes at $4 per pound. Ralph uses all of his ﬂour and eggs to
produce pasta, and he uses all of his tomatoes to produce marinara sauce. In total, Ralph produces 100 pasta
and marinara sauce dinners, which he sells at his restaurant for $5 per dinner. a. Using the expenditure loop analysis and focusing on sales of ﬁnal goods and services, what is nominal value . . . Q
ofGDP 1n Pastavrlle 1n 2008. .‘ ﬁﬂd Saves; I: +0 To”
‘ 4" £500 dl I'M“Nj$ .. 5:: u 4. """"""" “M b. What is the value added for each person in the economy: Frank, Tony, and Ralph? Frau/AC ,3: $504,.s/OO + .1200 w 12 c. What is the sum of value added for the economy? \IA 3— H030 Now, suppose that Ralph and Tony are good friends. Ralph gives Tony 10 free dinners, and therefore Ralph
only sells 90 of his pasta dinners at $5 apiece. Although Tony doesn’t pay for his 10 meals, each one has a
market value of $5. Tony consumes all his free dinners (and thanks Ralph profusely.) value for GDP? So éer Luau \ca, £50 laggf @373, {a O (D M, {Wm Fmtlm AC3
Wad." “(Owf1 H ‘3“)
CM t'nt‘MlC.{lgL..th\.QJ‘: "Limit W5; a"le ‘W‘ ' e. Now suppose a situation in which Ralph gives Tony those 10 free meals as above, but in additionto this
information it turns out that business is bad, and Ralph can’t sell the other 90 meals. In fact he only sells 70
meals in 2008. However, pasta dinners freeze nicely, so Ralph takes the 20 unsold meals and freezes them,
hoping to sell them in 2009 when business is better. How does this information impact on your calculation for the nominal value of GDP in Pastaville i11'2008? 3: ' ‘W If Cm w W \i "ink“ﬂ ‘ l 4 W is €19 £3
ﬁssile“ ms ' w a is “s new. min . “mi=4"
ill} . p,‘ M s m . u.  CC.M~.r Ma WMWs \W‘ﬁ‘w 3 ' m ‘MWW Q N" 13 ...
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