MIDTERM EXAM 1: MARCH 2009
ECON 0110:
MACROECONOMICS
12 PM CLASS
DR. KENKEL
THIS IS TEST 1 WITH ANSWERS
20 questions worth 12.5 points each.
Total Points = 250
1.
Use the following information for 2008:
Person is single, living alone
Personal exemption deduction is $3,500 per person
Standard deduction is $5,450
Gross income = $84,950
TAX RATES
TAXABLE INCOME
10%
$
0 - $
8,000
15%
$
8,000 - $ 32,500
25%
$ 32,500 - $ 78,800
28%
$ 78,800 - $164,550
Calculate the person's tax amount.
a.
Less than 12,750
b.
12,750 to less than 14,200
c.
14,200 to less than 15,200
*d.
15,200 to less than 17,000
e.
17,000 or more
ANSWER:
TAXABLE INCOME IS 84,950 – 3,500 – 5,450 = 76,000
taxes = 8000 X .10 + (32,500 – 8,000) X .15 + (76,000 – 32,500) x .25
= 800 + 3,675 + 10,875 = 15,350
2.
In the previous problem, the person's average tax rate on
gross income
is:
a.
less than 12%
b.
12.0% to less than 15.3%
*c.
15.3% to less than 19.6%
d.
19.6% to less than 22.4%
e.
22.4% or higher
ANSWER:
15,350/84,950 = .1807, or 18.07%
3.
You have a contract which states that you will be paid $37,000 two years from today and an
additional $26,000 three years from today.
Assume you could invest money at 6% annual interest
elsewhere in the economy.
What is the present value of the contract?
a.
Less than $50,000
b.
$50,000 to less than $53,000
*c.
$53,000 to less than $57,000
d.
$57,000 to less than $61,000
e.
$61,000 or more
ANSWER:
37,000/(1.06)^2 + 26,000 /(1.06)^3 = 32,929.87 + 21,830.10 = 54,759.97
4.
Suppose that, during 2006, real GDP was $7.44 trillion.
During 2006, the value of the Consumer
Price Index was 181.6 (using 1983 as the base year).
During 2006, nominal GDP was
a.
Less than 4.0 trillion
b.
4.0 trillion to less than 8.5 trillion
c.
8.5 trillion to less than 11.5 trillion
*d.
11.5 trillion to less than 14.0 trillion
e.
14.0 trillion or more
ANSWER:
7.44 x 1.816 = 13.51 trillion
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