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bo1mfall98 - B—Q’I Midterm Profl Gordon Oct 26 1998...

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Unformatted text preview: B—Q’I Midterm Profl Gordon Oct; 26, 1998 Problems- , For this section, show your work and your ansWers on the answer sheetprovided. Partial credit may be given, but only if you show your work. I. You have the foliowingiiatapon some fictitious nation; Consumption expenditure ‘ $1500 biliion: Investment ‘ ' , _ L 90 billion Corporate profits: 3 - '70 billion: Imports L 60 billion Exports 50 billion Government purchases * 150 billion Net taxes ' , 130 billion Given this infomation, caleuiate the, foHOWing vahies for this country: a) GDP b) aggregate expenditure c) net exports u d) aggregate income e) household saving a 1) government saving g) national saving . h) borrowing from the rest of the world: , l 2. Complete the following table: Emgloyed y ‘ Unemployed Labor Unemyloyment Workers ' Workers force rate 90- _ . * ' '10 - (a) , r (b) 100 , > (c):- 13 V: (d)! (e). (t)? 130 5.0 % 1,20 ' 6 (g) (h) Marginal Ft er , Cost 8.. g e 3'6 Benefit ‘ “('5 ~ percomputer‘ 3.4 E 3 : 2.7 ‘i 7 8 5’5, Camutefs {Millions per year) \ .1) In Figure 3.6, at the efficient level of computer production consumers are willing. to give up A) more, than 3 TVs per- computer. _ _ B) 0“ TVs per computer. C) between 0‘ and 3, TVs per computer. D) 3 TVs per computer. 2) Abe can catch: 10",pounds ot’ fish an hour or pick 10 pounds of firmt. Zeb can catch 30 pounds of fish an hour or pick 20 pOunds of fruit. The opportunity cost of fish is ' fior Abe than for Zeb, and the opportunity cost of fruit is p for Abe, than for Zeb. A) IoWer, higher. B) tower, lower. ' C) higher, higher; D) higher, lower. 3) A supply curve shoWs’ the relation between the quantity of a good supplied and A) the price of the good. Usually a? supply curve has negative slepe. B) income, Usually a supply curve has negative slope. C): the priCe of the good. Usually asupplyeurve has poSitive slope. D) incOme. Usually a‘ supply curve has positive slbpe. 4) Aesume that beef and pork are substitutes. There is a drought in the cattle grazing areas. This will cause the pork , - A) demand curve to shift rightward. B) supply curve to shift leftward. C)‘ supply'curve to shift rightward. D) demand curve to shift leftward. 5) All of the following are included in real GDP EXCEPT A) purchases of barbersr‘ Services. B)‘ transactions in the underground economy. C) purchases of nondurebte goods. ’ D), purchases of machinery by firms. . 6) The most general? description ofi business cycles is A) the cyclical movement in the interest rates. 13) the pattern of short-nut» upward: and downward movement in total output. C) the increase in consumer spending that accompanies an increase in disposable income. D) the cyclical change in the nation’s balance at trade. 7) If real GDP per person is $25,500;09 and population is 3 million, real GDP is approximately A) $76.5 billion , 8) $6,500.00. (2) $1176.50. D) $117.65. Table 5.1 Person A' Now that the kids are in school for a full day, this person is looking for work and has interviewed for three jobs during the past two weeks. Person B This person has been laid off from a job but expects to be called back as soon as the economy improves. Person C This person has just graduated from college and will start a new job in three weeks. In the meantime this person will tour the great American beaches Person, D This person was laid off last year when new equipment was installed at the plant, reducing the number of workers needed. Shortly after being laid off, this person looked for a new job, was unable to find one, and then stopped looking for work. 8) Table 5.1 shows answers given by people interviewed in a government survey of households. Which individuals are considered to be a part of the labor force? A) B, C, and D. B) A, C, and D. C) A, B, and C. D) C and D. 9) During the Great Depression, A)» productivity growth increased and the focus of macroeconomics changed to business cycles. B) the unemployment rate was nearly 25 percent and the major focus of macroeconomics switched to economic growth. C) economists paid more attention to stimulating aggregate expenditures. D) John Maynard Keynes suggested that inflation was the major problem facing capitalist nations. 10) Investment: A) does not include additions to inventories. B) increases the stock of capital. C) is the purchase of new capital. D) both A and B are correct. 11) If the economy's capital stock increases over time, A) gross private domestic investment equals depreciation. B) depreciation exceeds gross domestic private investment. C) depreciation is less than zero. D) net private domestic investment is positive. 12) A household's wealth will fall if saving A) rises and consumption falls. B) and consumption rise by the same amount. C) falls and consumption rises. D) and consumption fall by the same amount. 13) Transfer payments are flows of money from the government for A) both goods and services. B) services but not goods. C) goods but not services. D) neither goods nor services. 14) If mvestment is $1 billion and national eavmg is $200 000, then A) tot-al- invastment equals $200,000,000 B) the country must borrow $800, 000 000 firm the rest oE the world ‘ C) we must be lending $800,000000 D) exports must be greaterthar‘l imFQfis; 15) An inarease in wages will cause ‘ A)- short-mu aggregate supply is increase at any level oE output prices B) longerurr aggregate supply to decrease. C) short—run- aggregate supply to decrease at any level 0E output prices D) long-run aggregate supply is increase ' Figure 1.2 Price level o 3.5 4.0 5.0 6.0 7.5 Real GDP (trillions of dollars) 16) In Figure 7.2, if the economy is at point a, the price level rises to 110, and all other prices and nominal wages remain constant, output Supplied will be A) $75 billion (point d). _ , B) $4.0 billion (point f}. C) $3.5 brillon (point b). ' , E1): $6.0 billion (point e); Figure 7.3 Prise level A Pric e’ level a ' * weep o sass L"I30: “‘31 sAso Price revel on ' "Re‘arGDP o ” tsetse: (c) (a) * ' 17) In Figure 7.3, which point corresponds to an increase in technology? _ A)D B) A _ (1)3 me 18) One reason that the aggregate demand curve has a negative slope is because A) firms suppIy Iess- when prices use B) people buy more forefgn goods when the denies-tic priceleveI uses. C) nominal cash balances vary with the price level D) firms supply more when prices rise. 19) Which of the following does NOT shift the aggregate demand curve? A) an increase in the price level. ‘ B) p a; decrease in saving. , C) an increase in investment. D) a decrease In the money supply. 20) A rise in the expected rate of inflatim wiII A) increase the aggregate quantity demandfeei. B)? deemese- aggregate demand. C) increase aggregate demand. , D); decrease the aggregate Quantity demand-ed. 21) The Iebor force particrpatlon rate is the ratio of _ A) (the labor force: divided by the workmg—age population) X 100 B) (the labor fame dividee by the tetaI pspiflatien) X 106. C) (the number of unemployed diVided by the Iabsr fame) X 100 D) (the number of unemPoned divided by the Workmg~age population) X 100. 22) Between 1960 and 1994 average weekiy hours deelmed because of A) an increase in hours worked by full-time werkers and beee-use the number of part—time jabs increased faster than the number (if full-time jabs. B)- an increase in hours worked by hill—time workers and because the number of part—time jobs increased more slowly than the number of full-time jobs C) a decline in hours worked by full-time wbrkers and because the number of part— -time jobs increased faster than the number sf bill—time jebs D)- a decline in hours werked by full-J1me workers and because the number of part— —time jobs increased more sIowa than the number (I 23:) If the real wage rate is $15. 00 per hour and the price level is 180, the money wage rate is A} $27. 00 per hour. 8) $20 50 per hour. _.____.__.__.__..._.._________—____..__......._____....._r__..__._._.j....-,_ This person has just graduated from high school and will start college in three weeks. This person has been working at a part—time job but now will have to quit. Person B At the age of 45-, this person took early retitement from the automobile industry when new equipment was installed After a year of retirement, this person now wants to find~ a new job. ' Person C , As a result of this person's spouse being transferred to a- job in a new city, this person is looking for a new job. Person D This person met gracluated from college and is looking for an engineering 10b. In the meantime, this person is waiting tables ' _——-————.—_—'-—_——-_—--___—-_. __._——;_—___._———-____——_-__ , C) $18. 75 per hour. D) $16.67 per hour. 24) Table 8.2 shows answers g‘ven by people interviewed in the Current Population Survey. Which person (people) is (are) frictionally unemployed? A) C and D. B) B Figure 8.1 Real- wage ' (dollars ‘ per hour) .- O I I I '-.-q,— 59..-- I06 :25 1'50 175 zoo Loner (billions of hours) * C) c. 25) In Figure 8.1, if the real wage is $16 per hour, a labor A) shortage will occur and the real wage will fall. B) shortage will; occur and the real wage will rise. C) surplus will occur and the trial wage will rise. D) surplus will occur and the real wage will fall. D) A and c. 26) The NAIRU is _ A) Same as the natural rate of inflation B) Same as the naturaI rate of unemployment C) The unemPonment rate consistent with steady inflation D) (a) and“ (e) ' E) as) and (c) 27) Which oI the £011ng is NOT a consequence of accurately anticipated inflation - A) Rsciused holding of non-mterest—bearmg money B) Reduces after-tax return to savmg C) Windfall gains and Iosses D) Increased- after-tax return to Wing E) (b) and (dI 28) The first phrase doéerihas the change in reaI income from 1947—73; the second phrase describes the shangs in rsaI income from 1974— 94 A) slow ovetaII and; uniform aeross rich and poor; slow overall an(I faster for rich than poor B) rapid overs-II ancl faster for rich than poor; slow overall and Easier for rich than poor C) rapid overaII and uniform across fish and poor; slow overall and: faster for rich than poor. D) rapid overall and faster for rich than poor, slow overall and unifom setoss fish and? poor. E) rapid overalI and uniform aetoss rich and poor; slow overall and uniform across rich and poor 29) The sacrifice ratio is A) The amount of extra inflatit‘m sacrificed at low unemployment B) The amount of output sacrifiCed to reduce inflation C) The amount poor psopIs' must sacrifice when inequality rises D) The amount of consumption sacrificed to increase investment E) None of the above _ _ , 30) A hyperinflation is A) A situation when actual: unemployment falls below the NAIRU B) A situation when some! unemployment rises above the NAIRU C) An inflation rafe of more than 50 percent per year D) An inflation rate of mote than 1000 percent per year E) (b) and (C) ...
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