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Unformatted text preview: YORK UNIVERSITY FACULTY OF LIBERAL ARTS AND PROFESSIONAL STUDIES DEPARTMENT OF ECONOMICS ECONOMICS 1010 3.0M INTRODUCTION TO MACROECONOMICS TEST 1 February 11, 2010 \d\ \ 0W %\ Course Director: John Paschakis -—~ TOTAL WORTH: 40% WW5 M STUDENT NAME: STUDENT NUMBER: INSTRUCTIONS: 1) This examination consists of fifty (50) multiple choice questions. There is only one correct answer. No penalty for wrong answers. 2) Please answer all questions by marking the appropriate spaces on the computerized answer sheet. Use HB pencil only. 3) Time allowed: 80 minutes. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is true? A) Final goods and services produced abroad by Canadians are part of Canadian GDP. B) Final goods and services produced in Canada by foreigners are part of the foreign country's GDP. C) Final goods and services produced in Canada by foreigners are part of Canada‘s GDP. D) Final goods and services produced in Canada by foreigners are imports. E) Final goods and services produced in Canada by foreigners are exports. 2) In the circular flow model, . A) households are sellers of factor services in goods markets. 9 B) households are buyers of goods and services in the factor markets. C) firms are sellers of the factors in factor markets. D) firms are sellers of goods and services in goods markets. E) firms are buyers of goods and services in final markets. 3) Suppose the economy's capital increases over the year. It must be true that A) net investment was greater than gross investment. % B) net investment was positive. C) depreciation was greater than net investment. D) depreciation was greater than gross investment. E) depreciation is less than zero. 4) An art collector recently sold a piece of pottery for $300. He had purchased it for $200 two years earlier. How will the most recent sale affect GDP? A) GDP will increase by $100. B) GDP will not change. % C) GDP will increase by $300. D) GDP will increase by $200. E) GDP 2 years ago must be adjusted downwards by $200, and current GDP will rise by $300. 5) Which one of the following is not an example of investment in the expenditure approach to measuring GDP? General Motors A) buys a new auto stamping machine. B) adds 500 new cars to inventories. 0' C) buys shares in another company. D) builds another assembly plant. E) replaces some wom—out stamping machines. 6) Real GDP equals A) nominal GDP minus the value of intermediate goods. B) nominal GDP adjusted for the depreciation of capital. C) the value of final goods and services produced in a given year when valued at the prices of a reference base year. D) nominal GDP minus the value of goods exported to foreign countries. E) nominal GDP minus the rate of inflation. 1) 2) 3) 4) 5) 6) 7) If nominal GDP increased by 11 percent during a year while real GDP increased by only 5 percent, 7) then the A) price level decreased by 6 percent. % ff . ’f’ 3 B) price level increased by 16 percent. KI b C) price level remained steady but real output fell by 6 percent. .9 <3 C D) unemployment rate fell during the year. m. 2 / + .. a: E) price level increased by 6 percent. 8) The four parts of the business cycle occur in the following order: 8) A) recession, trough, peak, expansion. B) expansion, trough, peak, recession. C) recession, trough, expansion, peak. D) expansion, trough, recession, peak. E) trough, peak, expansion, recession. 9) A recession is a period with 9) A) negative growth rate in real GDP that lasts at least one quarter. B) positive growth rate in real GDP that lasts at least one quarter. 9 C) positive growth rate in real GDP that lasts at least two quarters. D) negative growth rate in real GDP that lasts at least two quarters. E) a slowdown in real GDP growth but not necessarily negative real GDP growth. 10) Which of the following statements by politicians is talking about the business cycle? 10) A) "Canadian unemployment is falling due to the upturn in the economy." B) "Crime rates increase every spring as the school year ends." k C) "An average of 220,000 new jobs are created each year in Canada." D) "More capital investment will create more jobs." E) “Business always rises just before Christmas." 11) Who of the following would be counted as unemployed in Canada? 11) A) Caitlin, who is 14 years old, and looking for a babysitting job. B) James, who is a full—time student looking for a part—time job. C) Youngrnin, who is a part-time hamburger flipper looking for a full—time job. D) Emmanuel, who lost his job at the steel plant when an automated assembly line was introduced six months ago, and has been job searching every day. E) Vik, who has been staying at home watching "The Old and the Boring" soap opera, and not searching since he was laid off at the flour mill. 1?.) In a country with a working—age population of 22 million, 16 million are employed, 2 million are 12) unemployed, and 1 million of the employed are working part—time, half of whom wish to work full—time. The unemployment rate is Z, A) 10 percent. B) 10.3 percent. U) l‘ 1 A :_ ___.._—— X ) 0‘0 D) 15.4 percent. t L, ‘1‘ L m C) 1 1.1 percent. E) none of the above. I ‘ 4 f— ) P -) 13) Complete the following sentence. In an expansion, typically 13) A) unemployment increases. B) the labour force participation rate increases. C) the employment-to—population ratio decreases. ' D) employment decreases. E) both B and D are correct. 14) In a country with a working—age population of 30 million, 18 million are employed, 2 million are 14) unemployed, and 2 million of the employed are working part—time, half of whom wish to work full—time. If 1 million of those unemployed are cyclically unemployed, what is the natural unemployment rate? A) 5.6 percent 2) :percent wb‘NQ‘) (l "r l. X7 \T'Q .7 ercen "‘ _ " Dilllpperceitlt MEI-Q " m *1 ‘ {m __ 'LB 5 .1 S“ E) none of the above 15) Which one of the following people is structurally unemployed? 15) A) a Saskatchewan welder who lost her job when her company relocated to B. C. and is currently looking for a job R B) a Nova Scotia fishery worker who is searching for a better job closer to home — — C) a steel worker who is laid off but who expects to be called back soon D) an office worker who has lost her job because of a general slowdown in economic activity E) none of the above 16) If the economy is at full employment, then 16) A) the entire population is employed. E B) the entire labour force is employed. C) the only unemployment is frictional unemployment plus discouraged workers. D) the unemployment rate is less than 3 percent. E) all unemployment arises from normal frictions and structural change. 17) When the unemployment rate the natural unemployment rate, real GDP 17) potential GDP. ‘ A) equal; is less than % B) is greater than; is less than C) is less than; is less than D) equals; is greater than E) is greater than; equals 18) If the CPI was 128 at the end of 2007 and 136 and the end of 2008, what was the inflation rate in 18) 2008? , A) 4.2 percent V7) G" \Zg Q C B) 5.9 percent ,_ x (516 .1“ x ( Q0 C) 6.25 percent (1‘ ' g g D) 8 percent \ L I )— E) 9.4 percent 19) The technique used to calculate the CPI implicitly assumes that consumers buy 19) A) relatively more of goods with relative prices that are increasing. B) relatively less of goods with relative prices that are decreasing. (:7/- C) the same relative quantities of goods as in a base year. D) goods and services whose quality improves at the rate of growth of real GDP. E) more computers and CD players and feWer black—and-white TVs. 20) Suppose a trade union and a firm agree to increase the wage rate by the same percentage as the 20) increase in the Consumer Price Index. If the CPI increases by 5 percent, then the real income of workers will A) increase by 5 percent as well. i ) B) remain unchanged, accounting for bias in the calculation of the CPI. C) decrease by 5 percent, accounting for bias in the calculation of the CPI. D) increase by more than 5 percent, accounting for bias in the calculation of the CPI. E) increase by less than 5 percent, accounting for bias in the calculation of the CPI. 21) In 2008, Armenia had real GDP of $4.21 billion and a population of 2.98 million. In 2009, real GDP 21) was $4.59 billion and population was 2.97 million. Between 2008 and 2009, Armenia's standard of living . _ 2 A)increased _ _ if: LL95} '1'; [-SL” B) decreased N") I L" fig fl} C) did not change D) might have increased, decreased, or remained unchanged E) doubled. 22) Using the Rule of 70, if the country of Flowerdom's current growth rate of real GDP per person is 7 22) percent a year, how long will it take the country's real GDP per person to double? — A) 1 year B) 2 years C) 10 years D) 49 years E) 7 years fire/(z) 1; t Errata £1 23) In which of the following decades did Canada experience the slowest economic growth? 23) O A) 19603 B) 19705 C) 19805 D) 19405 E) 19905 24) The aggregate production function is graphed as 24) A) a downward—sloping curve. ’ B) an upward—sloping straight line. C C) an upward—sloping line that becomes flatter as the quantity of labour increases. D) an upward-sloping line that becomes steeper as the quantity of labour increases. E) a production possibilities frontier. 25) If the money wage rate is $10.00 an hour and the price level is 60, the real wage rate is 25) A) $16.67 an hour. fir ‘ — B) $18.75 an hour. [Pro . C) $10.00 an hour. / Y I 6‘0 2, I gm (5? D) $12.50 an hour. 6 a E) $6.00 an hour. 26) In the labour market, an increase in labour productivity the real wage rate and 26) the level of employment. A) raises; increases B) raises; decreases C) lowers; increases D) lowers; decreases E) raises; does not change 27) An increase in labour productivity the real wage rate and an increase in population 27) the real wage rate. A) raises; lowers B) raises; raises C) lowers; lowers D) lowers; raises E) raises; does not change 28) Ceteris paribus, an increase in population results in a 28) A) higher level of labour employed and higher potential GDP per hour of labour. B) lower level of labour employed and higher potential GDP per hour of labour. C/ C) higher level of labour employed and lower potential GDP per hour of labour. D) lower level of labour employed and lower potential GDP per hour of labour. E) constant level of labour employed and constant potential GDP per hour of labour. 29) Human capital is the 29) A) machinery used by humans to produce GDP. B) technology used by humans to produce GDP. C) skill and knowledge accumulated by humans. D) plant and equipment produced by humans and not by machines. E) none of the above. 30) Separating the sources of labour productivity growth is the purpose behind 30) A) the national income and product acoounts. B) the production possibilities curve. C) macroeconomics. D) growth accounting. E) classical growth theory. 31) At the begimiing of the year, Tom's Tubes had a capital stock of 5 tube—inflating machines. During 31) the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's gross investment for the year totaled A) 1 machine. B) 2 machines. ( C) 3 machines. D) 6 machines. E) 8 machines. 32) Investment is financed by which of the following? 32) I. Government spending. II. Household saving. III. Borrowing from the rest of the world. A) I, II, and III. B) I and II only. C) I and III only. / D) II and III only. E) None of the above. 33) In 2003, Country A has net taxes of $30 million and government expenditures of $35 million. 33) Private saving in Country A is $5 million and consumption expenditure is $80 million. The government of Country A is running a budget and national saving is ' l A) surplus; $5 million . _ t ‘ E B) deficit; -$5 million *1 .— Q '1 ”S 3’3 S 11—” CA *l‘ C) deficit; $5 million ‘ D) surplus; $25 million E) deficit;zero M Sq; P S +Th C; Refer to thefigure below to answer the following questions. '5" y A S 5:" 0 Real interest rate [percent per your] 0 0.5 LO 1.5 2.0 [amiable funds (trillions of 2002 dollars! Figure 23.2.2 34) Refer to Figure 23.2.2. In Figure 23.2.2, an increase in expected profit will result in a movement 34) from point E to A) point P. R / B) point G. 35) All of the following are sources of loanable funds except A) business investment. B) private saving. C) government budget surplus. k D) international borrowing. E) none of the above. 36) In the market for loanable funds, as the real interest rate rises the and the A) quantity of loanable funds supplied increases; quantity of loanable funds demanded decreases B) quantity of loanable funds supplied decreases; quantity of loanable funds demanded increases C) supply of loanable funds increases; demand for loanable funds decreases D) supply of loanable funds decreases; demand for loanable funds increases E) quantity of loanable funds supplied increases; supply of loanable funds increases 37) The equilibrium real interest rate is determined by the A) demand for loanable funds curve and the supply of loanable funds curve. B) demand for loanable funds curve and real GDP. % C) supply of loanable funds curve and financial institutions. D) government expenditure curve and the taxation curve. E) banks and insurance companies. 38) Technological progress that increases expected profit shifts the demand for loanable funds curve A) leftward and decreases the real interest rate. B) rightward and increases the real interest rate. C) rightward and decreases the real interest rate. D) leftward and increases the real interest rate. E) rightward and the supply of loanable funds curve leftward. 39) A decrease in the government budget deficit decreases the loanable funds and an increase in the government budget surplus increases the loanable funds. A) demand for; demand for B) demand for; supply of C) supply of; demand for D) supply of; supply of E) demand for loanable funds and the supply of; supply of loanable funds and the demand for 40) A government budget surplus occurs, which loanable funds. The real interest rate , household saving and investment A) increases the demand for; rises; increases; decreases O B) increases the supply of; falls; increases; decreases C) increases the supply of; falls; decreases; increases D) decreases the demand for; falls; decreases; increases E) decreases the supply of; decreases; decreases; increases 35) 36) 37) 38) 39) 40) 41) Money's function as a store of value can best be described as 41) A) an agreed measure for stating the prices of goods and services. B) a guarantee of a double coincidence of wants. C) an efficient means of writing contracts over a long time period. D) something that can be held and exchanged later for goods and services. E) a generally acceptable exchange system. 42) Money can take the form of any one of the following except 42) A) a credit card. B) a chequing deposit. - C) a saving deposit. D) Bank of Canada notes. E) coins. 43) If Wolfgang transfers $1,000 out of his chequable deposit account and places it in his 43) non—chequable deposit account, A) M1 and M2 fall. B) M1 falls and M2 rises. C) M] falls and M3 rises. D) M1 falls and M2 remains the same. E) M1 rises and M2 remains the same. 44) Which one of the following would not be considered a depository institution? 44) A) The Bank of Canada. B) A credit union. C) A caisse populaire. D) A trust and mortgage loan company. E) The Bank of Montreal. 45) Which of the following does not affect the size of the monetary base? 45) A) The amount of notes issued by the Bank of Canada. - B) The amount of loans issued by chartered banks. C) The amount of coins issued by the Canadian Mint. D) The amount of chartered bank deposits at the Bank of Canada. E) None of the above. 46) If a customer of a bank makes a withdrawal from his chequable deposit account, 46) A) M2decreases. Kg {9 1M) 5' l B) the bank's reserve ratio increases. or C) the bank's reserve ratio decreases. 5 .Q .Q =§ \ sl§ MW D) the bank's reserve ratio remains the same. , E) M1 decreases. 9‘3— m 3&WL 47) The Canadian money multiplier is calculated as the L 9.6) '2 (‘fi 47) A) change in monetary base divided by the change in deposits. :1. E: C W) B) change in quantity of bank notes divided by the change in monetary base. C) change in monetary base divided by the change in monetary holdings of households. V D) change in the quantity of money divided by the change in the monetary base. E) change in monetary base divided by the change in quantity of money. 48) The opportunity cost of holding money increases when the 48) A) purchasing power of money increases. B) interest rate rises. C) price of goods and services decrease. D) income of consumers increases. E) income of consumers decreases. 49) Nominal money is equal to real 49) A) money times the price level. B) GDP times the price level. C) GDP times the GDP deflator. D) money divided by the price level. E) GDP times real money. 50) If households and firms find they are holding less money than desired, they will 50) A) sell bonds, and the interest rate will rise. B) sell bonds, and the interest rate will fall. C) buy bonds, and the interest rate will rise. D) buy bonds, and the interest rate will fall. E) buy goods, and the price level will rise. Answer Key g e CF “P M Testname: 1010M-TEST1-W10 1) C 2) D 3) B 4) B 5) C 6) C 7) E 3) C 9) D 10) A 11) D 12) C 13) B 14) B 15) A 16) E 17) B 13) C 19) C 20) D 21) A 22) C 23) C 24) C 25) A 26) A 27) A 28) C 29) C 30) D 31) C 32) D 33) E 34) A 35) A 36) A 37) A 38) B 39) B 40) C 41) D 42) A 43) D ...
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