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Unformatted text preview: ECON 102 (Winter Quarter 2007) Answer Key for the First Midterm 2007 February 8, 2007 Part A Part A.1. Uncertain. Real GDP increases since transactions that used to take place in the in- formal (underground) economy are now carried out in the marketplace and are recorded properly. Real GDP is an imperfect measure of living standards. Living standard is a much broader concept. For instance, some people may have ethical reasons for not supporting the use of drugs and theyll be worse off with everyone around them puffing on Marlboro joints. Others may be happier because they can smoke a joint whenever they please, without the worry of being arrested. Part A.2. False. The CPI and GDP deflator use a different basket of goods and services. For instance, the CPI includes imported goods while GDP only consists of domestically produced goods. Similarly, the CPI by definition only includes consumer goods, whereas GDP also contains producers equipment. 1 Part A.3. False. In the Solow growth model, a shift in n is associated with a different steady state. In particular, a lower population growth rate is associated with a higher steady-state output per capita Y L (see figure 7-11 in Mankiw, p. 207)....
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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