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Unformatted text preview: Eldar Sehic SFU 20093 ECON105 first exam (page 1 of 5) 10 QUESTIONS, 3 MARKS EACH (1) Consider the TIMEI’OUTPUT graph. (a) Draw the graph and clearly label a recession. Ou‘ﬂ’u‘r MN’5'5‘“ 'T ‘ 2 X “r ‘
_}’/ o'/ ' "f'rmé (b) What variables can change the potential output of the economy? FAL‘TCJIQ Suﬁ"LT ("W—'55,)
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Tﬁtr‘rNocogj (PF8 DAL’N'IT‘f) (2) Imagine an economy where the peach farmer picks and sells $600 of peaches to the yogurt
factory and $300 of peaches to another country. The milk factory sells $800 of milk to the yogurt factory and $500 of milk to consumers. The yogurt factory uses the peaches and milk to make yogurt,
and sells $2400 of yogurt to consumers and $200 of yogurt to the government. (a) Measure the economy’s GDP by valueadded.
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“i ('30:: + 1‘190)+(2.sp) + (300) : B‘foo Eldar Sehi'c SFU 20093 ECON105 first exam (page 2 of 5) (3} Using a completely labelled NSJNAF graph show what happens immediately when consumer
optimism n‘ses. wNJ'LI(M£fL oﬂ‘FiNis‘z‘i '7 Frtom Co (I) n; (:(2)) (4) Consider a small economy that produces only goods X and Y. The price of good X was $1 in 2005,
$3 in 2006, and $2 in 2007. The price of good Y was $4 in 2005, $6 in 2006, and $4 in 2007. The
quantity of good X was 10 in 2005, 5 in 2006, and 5 in 2007. The quantity of good Y was 5 in 2005, 5
in 2006, and 10 in 2007. Let 2007 be the base year. Calculate the inflation rate from 2005 to 2006. .._. p 7r _ 3"
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economy if the relative international price rises. ,.'j: ’/a—.t
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w {n+qe+{c' INJécTivHSf _ ,7 (6) Imagine an economy with no government, such that autonomous consumption is $65, autonomous
investment is $10, and autonomous exports are 525. Also, the marginal propensity to consume is 95%,
and the marginal pmpensity to import is 5%. (a) Find the equilibrium income.
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(b) If autonomous exports decrease by 510, what will be the new equilibrium income?
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_2 : 8cm ‘icm ' 7 Eldar Sehi'c SFU 20093 ECON105 first exam (page 4 of 5) (7) Assume the economy is currently in a recessionary gap. (a) Show using an ADXASILRAS graph what will happen if the government's longrun solution is used? {7 M45 (b) What is an advantage of using the government's long»run solution in a recessionary gap? Mr:va PCSSI'GLC: ANSwees .' F451”: '5 ti 71’4"“ MG“: Yd FWC‘W‘WMMJ',
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(c) What is a disadvantage of using the government's longrun solution in a recessionary gap? Mair“? PHSHTLJE xiiriﬂed .' FT. Hurtr) Trees‘5 kw“? J’7V’N‘55; #1443 Pravda6 ﬁf’t’NtH‘v‘ﬁr (8) Imagine an economy at its potential with an equilibrium output of $400. Then there is an increase
in investment of $50. The immediate effect is that equilibrium output becomes $550. The shortrun
effect is that equilibrium output becomes $500. (a) Calculate the simple multiplier. A_ thin1t an 143 L; 5—5.5 L_ Lt u _ ‘
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Alkéo(tf"lr"ld9ﬂ_f7) 5b 513 (c) What long—run solution will return the economy to the old price level? bﬁcitche Sf’éM'pzm 9 Eldar Sehic SFU 20093 ECON105 first exam (page 5 of 5) (9) Assume the economy is initially at its potential. Then the government increases the marginal
propensity to tax. (a) Using a completely labelled AD/ASKLRAS graph, show what happens immediately and in short—run? M45 A f (b) What happens to exports in shortrun? mealtime (K0?) mum: Fug. (10) Imagine the economy's GDP is 560. Its factor supply is 20, and its productivity is 54. If
productivity becomes $5, while other variables remain the same, what will be the new GDP? Explain
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 Spring '10
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 Economics, Macroeconomics, short—run

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