Econ102_Midterm_Number_2_Nov_13

# Econ102_Midterm_Number_2_Nov_13 - Macroeconomics Midterm#2...

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Name___________________________________________ 1 1. The price index in the first year is 150; in the second year it is 160; and in the third year it is 175. The inflation rate is about a. 1.07 percent between the first and second years, and 1.09 percent between the second and third years. b. 5.4 percent between the first and second years, and 9.4 percent between the second and third years. c. 6.7 percent between the first and second years, and 9.4 percent between the second and third years. d. 10 percent between the first and second years, and 1.09 percent between the second and third years. e. None of the above 2. The market basket used to calculate the CPI in Pleasant Valley is 4 loaves of bread, 6 gallons of milk, 2 shirts and 2 pants. In 2005, bread cost \$1.00 per loaf, milk cost \$1.50 per gallon, shirts cost \$6.00 each and pants cost \$10.00 per pair. In 2006, bread cost \$1.50 per loaf, milk cost \$2.00 per gallon, shirts cost \$7.00 each and pants cost \$12.00 per pair. Using 2005 as the base year, what was Pleasant Valley’s inflation rate in 2006? a. 30 percent b. 24.4 percent c. 21.6 percent d. 33.3 % e. It is impossible to determine without knowing the base year. 3 The president of a poor country has announced that he will implement the following measures which he claims are designed to increase growth: 1). Reduce corruption in the legal system; 2). Reduce reliance on market forces because they allocate goods and services in an unfair manner; 3). Restrict investment in domestic industries by foreigners because they take some of the profits out of the country; 4). Encourage trade with neighboring countries; and 5). Increase the
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## This note was uploaded on 05/23/2010 for the course ECON 102 taught by Professor Payan during the Fall '09 term at Glendale Community College.

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Econ102_Midterm_Number_2_Nov_13 - Macroeconomics Midterm#2...

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