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midterm1answersspring2007version1 - Economics 302 Spring...

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Economics 302 Name _______________________________ Spring 2007 Answers to First Midterm Student ID Number ____________________ February 22, 2007 Section Number _______________________ This midterm consists of four parts: a binary choice section comprised of 10 questions worth 2 points each; a short response section with 4 short response questions worth 5 points each; a problem section with two problems worth a total of 40 points; and an essay section worth a total of 20 points. You will want to write legibly since illegible answers will be graded as wrong answers. You will want to present your work in an orderly fashion since a lack of organization will be interpreted as a lack of mental clarity and competent expression. You will want to make sure your answers are clear and easy to find on the test. In the binary choice section of the exam, pick the BEST answer. All work should be done on the exam booklet and all answers should provide work and any formulas that are used. A lack of work for any answer will be penalized by a lower grade on that section. If there is an error on the exam or you do not understand something, make a note on your exam booklet and this issue will be addressed AFTER the examination is complete. No questions regarding the exam can be addressed while the exam is being administered. Calculators are fine to use. SCORE: Binary Choice 20 points __________________ Short Response 20 points 1. __________________ 2. __________________ 3. __________________ 4. __________________ Problems 40 points 1. 20 points __________________ 2. 20 points __________________ Essay 20 points __________________ TOTAL 100 points __________________ 1
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I. Binary Choice (worth 2 points each or 20 points total) 1. According to the Quantity Theory of Money , an increase in the money supply will affect the value of a. Real GDP in the economy. b. Nominal GDP in the economy. B. In an economy real GDP is determined by the factors of production and the production function: a change in the money supply does not affect either the level of resources or technology available to an economy. A change in the money supply does affect the aggregate price level and hence, the nominal GDP. 2. Suppose an economy’s production function is given by Y = 10K 1/4 L 3/4 . Then the ratio of labor income to capital income equals a. 3. b. 1/3. A. The ratio of labor income to capital income equals [(3/4)(Y)/(1/4)(y)] = 3. 3. According to the Loanable Funds framework an increase in government spending holding everything else constant results in a. A leftward shift in the supply of loanable funds and a movement along the demand for loanable funds curve resulting in a decrease in investment spending. b.
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midterm1answersspring2007version1 - Economics 302 Spring...

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