midterm - Intermediate Macro 302b 1. The two major reasons...

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Intermediate Macro 302b 1. The two major reasons for the tremendous growth inoutput in the U.S. economy over the last 125 years are (a) population growth and low inflation. (b) population growth and increased productivity. (c) low unemployment and low inflation. (d) low inflation and low trade deficits. 2. The Bigdrill company drills for oil, which it sells for $200 million to the Bigoil company to be made into gas. The Bigoil company’s gas is sold for a total of $600 million. What is the total contribution to the country’s GDP from companies Bigdrill and Bigoil? (a) $200 million (b) $400 million (c) $600 million (Quiz 1b 2007) (d) $800 million 3. To ensure that the fundamental identity of national income accounting holds, changes in inventories are (a) treated as part of expenditure. (Quiz 2) (b) treated as part of saving. (c) ignored. (d) counted as consumption. 4. The table below represents Freedonia’s macro data for 2003 and 2004. Year Y K N 2003 2000 1700 70 2004 2100 1785 75 Suppose that the production function is given by Y = AK 0.25 N 0.75 . Between 2003 and 2004, total factor productivity of Freedonia’s economy increased by (a) –1.5%. (b) 5.0%. (c) 5.5%. (d) 12.7%. 5. An adverse supply shock would (a) shift the production function up and decrease marginal products at every level of employment. (b) shift the production function down and decrease marginal products at every level of employment. (c) shift the production function down and increase marginal products at every level of employment. (d) shift the production function up and increase marginal products at every level of employment. 6. An increase in the real wage rate will cause (a) the labor demand curve to shift to the right. (b) the labor demand curve to shift to the left. (c) the quantity of labor demanded to rise. (d) a movement along the labor demand curve. 7. Someone is more likely to increase labor supply in response to an increase in the real wage, the _____ is the income effect and the _____ is the substitution effect. (a) larger; larger (b) larger; smaller (c) smaller; larger (d) smaller; smaller 8. What is the participation rate if there are 125 million people in the labor force, 100 million people employed, and 25 million not in the labor force? (a) 83% (b) 80% (c) 75% (d) 67% 9. Last year, Linus earned a salary of $25,000 and he spent $24,000, thus saving $1000. At the end of the year, he received a bonus of $1000 and he spent $500 of it, saving the other $500. What was his marginal propensity to consume? (a) 0.96 (b) 0.50 (c) 0.04 (d) 0.02 10. In 2003, your firm’s capital stock equaled $100 million, and in 2004 it equaled $105 million. The average depreciation rate on your capital stock is 20%. Gross investment in 2004 equaled (a) $1 million. (b) $5 million.
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midterm - Intermediate Macro 302b 1. The two major reasons...

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