08SM1ans - Economics 502.01 Professor McCaffertv S...

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Professor S. McCaffertv Economics 502.01 Midterm Examination I Spring,2008 4r-r SUgeS Name: Directions: Answer all questions. Thereare two sections to this exam. Part I: Multiple Choice. Each question is worth two (2) points. Please circle the letter corresponding to the best answer. 1. In analyzing macroeconomic dataduring the past year, you have discovered that average labor productivity fell, but total output increased. What was most likely to have caused this? a.) There is nothing unusual in this outcome because this is what normally occurs. b.) The capital/output ratio probably rose. @ nt"t"was an increase in labor input. d.) Unemployment probably increased. 2. Which of the following best describes a typical business cycle? @ E"o.romic expansions are followed by economic contractions. b.) Inflation is followed by unemployment. c.) Trade surpluses are followed by trade deficits. d.) Stagflation is followed by inflationary economic growth. 3. Before World War II, the average level of prices in the United States usually 4. U.S. imports are goods and services d) oroduced abroad and sold to Americans. b.) produced in the United States and sold to Americans. c.) produced abroad and sold to foreigners. d.) produced in the United States and sold to foreigners.
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2 5. Why were the U.S. government budget deficits of the 1980s and early 1990s so unusual from a historicalpoint of view? @ tn the past, deficits were usually that large only in wartime. 6. The value of a producer's output minus the value of the inputs it purchases from other producers is called the producer's 7. The equation total production : total income: total expenditure is called a.) the goods-market equilibrium condition. b.) the total identity. @ ,n"fundamental identity of national income accounting. d.) Say's Law. 8. Because government services are not sold in markets, @ tn"y are valued at their cost of production.
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