E304exam1_mc_B_KEY

# E304exam1_mc_B_KEY - ECON 304.013 Exam 1 Part 2 Form B KEY...

This preview shows pages 1–3. Sign up to view the full content.

ECON 304.013 Exam 1 Part 2 Form B KEY - Exam 1 is worth 100 points and has three sections. The Short Answer/Essay part was worth 30 points, the multiple choice questions are worth 2 points each for a total of 60 points, and the True/False questions below are worth 2 points each for a total of 10 points. TRUE / FALSE: Bubble in “A” for True or bubble in “B” for false on your scan sheet. Also write the word “true” or “false” on the lines below. This section is worth 10 points, 2 points for each T/F question. 1. FALSE At the start of the year, your firm's capital stock equaled \$10 million, and at the end of the year it equaled \$15 million. The average depreciation rate on your capital stock is 20%, so your net investment during the year was \$8 million. 2. TRUE The employment ratio is 75%, there are 90 million people employed and there are 20 million people not in the labor force. Therefore, the number of people unemployed must be 10 million. 3. FALSE The Obama administration’s forecasts for economic expansion from the proposed \$1 trillion dollar stimulus package use an estimated government spending multiplier of 1.5. Economist Robert Barro disagrees with the Obama administration’s estimates. Barro’s research on the government spending multiplier suggests that if the \$1 trillion stimulus package passes, Gross Domestic Product (GDP) will expand by a multiplier of 0.8, not 1.5 like the Obama administration estimates. 4. FALSE Assuming the stimulus plan is passed by congress within the next month, over 80% of the \$1 trillion stimulus plan will be spend in the current fiscal year, meaning that we can expect it to stimulate the economy as planned. The only real concern about the stimulus packages is the potential for inflation, since this is a dramatic increase in spending over the 2008 government budget. 5. TRUE The current recession was triggered by the subprime mortgage crisis where banks sold many mortgages to risky borrowers. When a large portion of these borrowers began to default, some banks and other firms that invested in these mortgages went out of business and banks dramatically reduced their amount of lending. This crisis in the banking sector kicked off the downward spiral of lowered consumer confidence that can cause a recession. Page  1  of  8

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
ECON 304.013 Exam 1 Part 2 Form B Directions: The questions below are multiple choice. Circle the answer you have selected on this test packet AND bubble in the corresponding letter on your scan sheet.
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern