SP13_Econ1015_Lecture 2_Exam 2_Version 1_Solution(1).pdf - SP13 Econ1015 TA Name Exam 2_Version 1 Solution Student Number PRINCIPLES OF MACROECONOMICS

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SP13: Econ1015 Exam 2_Version 1 TA: Solution . Name: Student Number: . PRINCIPLES OF MACROECONOMICS Econ1015 Lecture 2 Spring, 2013 Directions: You should have nothing on your desk at this time other than the exam, pencils, an eraser and a scantron form. Scantron MUST include (clearly READABLE ): 1) Student Name: Your last name, first name 2) Student No: Your MU student number 3) Teacher: Your TA’s name 4) Special code: The first column - Test Version (1, 2, 3 or 4) 5) Student Number: Your MU student number 6) Name: The first column - TA (see the table below) Skip a space then Last name Skip a space then First name TA TA Name TA TA Name A Devin Kelsey E Ingul Baek B Kyungsik Nam F Byung Min Soon C Hannah Swann G Xing Tang D Weiwei Wu You have 75 minutes to answer the following multiple-choice questions. Please choose the BEST answer of the choices offered. This exam is yours to keep. Mark your answers on the exam so that you can grade your answers . You must turn in your scantron and this cover page to your TA. The solutions will be posted on the Class blackboard by 4:00pm today . Please fill out the following Bubbles
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SP13: Econ1015 Exam 2_Version 1 1. People suffer from inflation because it reduces the purchasing power of money. This is a description of: (1) The decrease in equilibrium employment rate money supply (2) The inflation tax (3) The real price of money (4) The nominal price of money (5) The real decrease in Nominal wage 2. Suppose that Juan owns a shoe repair shop in the capital of Brazil, Brasilia. The value of the Brazilian Reais dropped last year at a rate of 5% per day. One day you walked into the store to find Juan grumbling about the inflation rate as he erased a chalk board that reads, “today’s prices for shoe repairs…” Juan was most likely grumbling about: (1) The marginal benefit of inflation (2) The increasing price of chalk boards (3) The shoe-leather cost of inflation (4) The menu cost of inflation (5) The efficiency effects of inflation 3. Suppose that in the island of Berry, the CPI in year 1 was 200 and the CPI in year 2 was 212. Shayla, a resident of Berry, borrowed money in year 1 from Alanna’s Bank and repaid the loan in year 2. If the nominal interest rate on the loan was 5 percent, then the real interest rate paid was (1) 11 percent. (2) 6 percent. (3) 5 percent. (4) 1 percent (5) -1 percent. 4. You put money in an account that earns a 10 percent nominal interest rate. The inflation rate is 3.5 percent, and your marginal tax rate is 30 percent. What is your after-tax real rate of interest? (1) 20 percent (2) 10 percent (3) 7 percent (4) 6.5 percent (5) 3.5 percent ANSWER THE NEXT TWO QUESTIONS ON THE BASIS OF THE FOLLOWING INFORMATION. Suppose a basket of goods costs $160 in the base year of 1928 and $120 in 1933. 5. The value for the CPI in 1933 is: (1) 0.75 (2) 1.33 (3) 75 (4) 133.3 (5) 120 6. Suppose your grandmother told you that her money wage was $3.00 per hour between 1928 and 1933 while she worked as a nurse at the University hospital. She told you that she was very lucky to keep a job although her wage didn’t increase at all during the period. After listening to your grand
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