Deardorff,_w06-1,_no_answers

Deardorff,_w06-1,_no_answers - Econ 102 Midterm 1 February...

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Econ 102 Midterm 1 February 9, 2006 Part I: Multiple Choice: (26 Questions, 3 pts each=78 pts) Select the best answer among the given choices 1. Please indicate which of the following statements are true I. In general, stocks are riskier than bonds, so bonds must pay a higher return II. Government bonds are considered less risky than corporate bonds III. Stocks and bonds are attractive financial instruments that pay fixed returns. a) I only b) II only c) III only d) I and III only e) II and III only Use the following table to answer questions 2 and 3: Year Nominal GDP (in billions) GDP Deflator (base year 1997) 2000 10,453 121 2001 11,115 124 2002 11,990 125 2. Inflation between 2000 and 2001 was approximately a) 2.5 percent b) 3.0 percent c) 3.8 percent d) 6.3 percent e) 8.2 percent 3. What was the approximate percentage change in real GDP between 2000 and 2002? a) 18.5 percent b) 14.7 percent c) 11.0 percent d) 7.0 percent e) 4.0 percent 1
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4. Which of the following statements is true? a) The GDP deflator calculates inflation using the current production basket while the CPI uses a fixed production basket. b) The rate of change of the GDP deflator indicates real GDP growth because it is based on current production in the economy. c) Changes in nominal GDP are the same as changes in the CPI because both capture changes in the cost of living. d) The GDP deflator calculates inflation using the current production basket while the CPI uses a fixed consumption basket. e) The GDP deflator is in real terms while the CPI is in nominal terms. For Questions 5 & 6, suppose the following events took place in Slovakia in Year 0. I. Congress passed a law exempting capital gains from taxation II. The average savings rate of the citizens of Slovakia temporarily increased by 1% III. Slovakian firms increased research and development efforts in response to a new government initiative IV. New unpopulated land was annexed from Poland, which increased the natural resource endowment of Slovakia 5. Which of the events above will most likely increase Slovakia’s per capita GDP level in the long run? a) I and IV b) I, II and III c) IV only d) III and IV e) I, II, III and IV 6. Which of the events above will most likely increase Slovakia’s per capita GDP growth rate in the long run? a) III and IV b) IV only c) I and III d) III only e) I, II, III and IV 2
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For Questions 7 & 8 consider the following countries, their current GDP per capita figures, and growth rates as indicated. Assume that growth rates for all countries are constant: Country Current GDP per capita Growth Rate per capita Slovakia $7,000 X Sweden $28,000 2.5% United States $35,000 2% Mongolia $3,000 4% 7. What would Slovakia’s growth rate have to be in order for Slovakians to be approximately as well off as Swedes in 140 years? a)
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Deardorff,_w06-1,_no_answers - Econ 102 Midterm 1 February...

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