EC4710-M1-F07

EC4710-M1-F07 - NAME: ECONOMICS 4710 MIDTERM EXAM-1...

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NAME: ECONOMICS 4710 MIDTERM EXAM-1 Louisiana State University Instructor: Bulent Unel Date: September 27, 2007 Important: This is a closed book exam. The exam has two parts. The first part consists of 20 multiple choice questions and the second part consists of 2 quantitative questions. Check that you have them all. Do not take any part of this exam with you when you leave.
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Part I: Multiple Choice Questions (Each 2.5 pts). 1. If GDP (measured in billions of current dollars) is $5,465 and the sum of consumption, investment, and government purchases is $5,496, while export equals $673, imports are a. $673. b. -$673. c. $704. d. -$704. Answer: c [ GDP = C + I + G + EX - IM IM = 704] 2. All of the following actions are investments in the sense of the term used by macroe- conomists except: a. IBM is building a new factory. b. corner candy store is buying a new computer. c. John Smith is buying a newly constructed home. d. David Cook is buying 100 shares of IBM stock. Answer: d 3. The marginal propensity to consume is: a. normally expected to be between zero and one. b. equal to consumption divided by disposable income c. normally assumed to decrease as disposable income increases. d. normally assumed to increase as disposable income increases. Answer: a 4. When the demand for loanable funds exceeds the supply of loanable funds, households want to save —– than firms want to invest and the interest rate —–. a. more; rises b. more; falls 2
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c. less; rises d. less; falls Answer: c 5. According to the model developed in class, when taxes decrease without a change in government spending: a. consumption and investment both increase. b. consumption increases and investment decreases. c. consumption and investment both decrease. d. consumption decreases and investment increases. Answer: b 6. Open-market operations are: a. Commerce Department efforts to open foreign markets to international trade. b. Federal Reserve purchases and sales of government bonds. c. Securities and Exchange Commission rules requiring open disclosure of market trades. d. Treasury Department purchases and sales of government bonds.
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EC4710-M1-F07 - NAME: ECONOMICS 4710 MIDTERM EXAM-1...

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