This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Econ 102 - Answer Key for First Midterm 2008 01.31.2008 Part A 1. True, False, or Uncertain. The key point is that part of production moved into the under- ground. Therefore measured real GDP falls. Living standards are not affected by much since alcohol consumption is still possible. 2. True. If real GDP increased in 2007 prices (PQI>1) the new bundle must be preferred since last years bundle is still affordable. If real GDP decreased in 2006 prices (LQI<1) the old bundle is preferred since the new bundle was affordable last year. But they cannot both be preferred over the other hence the two statements contradict each other. You can answer False if you argue that preferences (and therefore the preferred bundle) might have changed. 3. False. Take the example Y = K ( AL ) 1- . Then we showed that the steady state of output per unit of effective labor is decreasing in n. Hence Y L = k A as n . So there is a positive level effect....
View Full Document
This note was uploaded on 04/03/2009 for the course ECON 102 taught by Professor Serra during the Winter '08 term at UCLA.
- Winter '08