Final Exam w- Answers Name_1

Final Exam w- Answers Name_1

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Economics 002 Name: ________________________________________ Professor Feldman Final Exam Section: ______________________________________ May 5, 2009 (Time and TA’s name) You have 2 hours to complete the exam, which consists of: 25 True/False questions (circle either “True” or “False”) – Each question is worth 5 points; 30 Multiple-choice questions (circle the correct answer) – Each question is worth 10 points; 3 Short-answer questions – The first is worth 20 points, the second 40 points, and the third 35 points. The total number of points is 520. If you are having trouble with a question, you may want to skip it at first and come back to it later. When a question refers to the Economic Fluctuations Model, assume the monetary policy rule only relates the real interest rate to inflation, unless the question explicitly indicates that the monetary policy rule also takes into account the output gap. When using the growth accounting framework, use a coefficient of one-third (⅓) on the capital- labor ratio unless otherwise instructed. You may refer to one 3” x 5” card with your written notes and use a calculator, but you may not use any other notes or references. Good luck. True or False Questions 1. True or False. Real GDP in 2007 and the growth rate of real GDP in 2008 would be sufficient information for you to be able to compute real GDP for 2008. [True] 2. True or False: Using the table below, the unemployment rate is 5 percent. [False] Working-Age Population Labor Force Employed Labor Force 200 100 90 3. True or False. The efficiency wage theory of unemployment assumes
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that the productivity of workers increases with the wage rate. [True] 4. True or False. The graph below, from the spending allocation model, illustrates the following combination of events: the government’s long- run share of GDP rises and reduced demand for U.S. bonds causes the exchange rate to fall. [Note: In the graph, the thin lines show the original equilibrium and the thick lines show the curves after they have shifted.][True] 5. True or False. The graph below, from the spending allocation model, illustrates the following combination of events: a long-term decline in consumer confidence, combined with a decline in government’s share of GDP. [True] 2
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6. True or False. Assuming that the Fed purchases $1,000 of bonds, the required reserve ratio is 0.05, and no bank holds any excess reserves, then the money supply will decrease by $20,000. [False] 7. True or False. The quantity theory equation is all about quantities not prices. [False] 8. True or False. According to economic growth theory, increases in labor, other things equal, increase real GDP but not productivity. [True] 9. True or False. Suppose that policymakers desire real GDP per hour of work to grow by 3.5 percent a year. If policymakers believe that technology will grow at a rate of 2 percent per year, the capital stock per hour of work would have to increase by approximately 4½ percent. [True]
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Final Exam w- Answers Name_1

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