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midterm1 answer key

midterm1 answer key - Midterm 1*VERSION D Econ 2 Winter...

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Unformatted text preview: . - Midterm 1 ***VERSION D*** . Econ 2 Winter 2010 T A /Section Time Name H745 WI” l<t’/(7_ ID# MULTIPLE CHOICE. (2 points each) Choose the one alternative that best completes the statement or answers the question. ' >1) Discouraged workers are 1) C p j A) workers who have a part time job but want a full time job. 5 B) Workers who have consistently been looking for work for more than 4 weeks. C) workers who have stopped looking for work because they believe there are no jobs for them. D) workers who find their current jobs unfulfilling and are considering a job change. " 2) Every society faces economic tradeoffs. This means ' ’ 2) D A) society's output cannot be made available to all. B) not everyone can have enough goods to survive. C) some people live better than others do. D) producing more of one good means less of another good can be produced. Table 8—2 (1982-1984 =100) —— 3) Refer to Table 8-2. Suppose that the data in the table above reflects the prices in the economy. What 3) fl' is the inflation rate in between 2004 and 2005? A) 20% B) 5% C) 2% D) 10% E) 12% 4) If the GDP deflator is 142, by how much have prices changed since the base year? ' 4) a ‘i A) Prices have increased by 42%. B) Prices have decreased by 4.2%. C) Prices have increased by 58%. D) Prices have increased by 142%. 5) Unemployment arising from'a persistent mismatch betWeen the skills and characteristics of 5) C workers and the requirements of jobs is called - A) cyclical unemployment. B) frictional unemployment. ‘ C) structural unemployment. D) seasonal unemployment. E) unnatural unemployment. 6) In the United States, the largest component 0t spending in GDP is p U 6) £3 A) government spending. B) consumption spending, C) investment spending. D) net export spending. Table 8—6 Expenditures (2000) , (2008) Backpacks — 4 —_$1-oo $100 _—_$soo 7) Refer to Table 8-6. Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2000 is the base year, then what is the CPI for 2008? A) 40.08 B) 208 C) 180 D) 100 8) Which of the following is part of an economic model? I“ A) preferences of economic agents B) opinions C) assumptions D) norms 9) Gross domestic product in the economy is measured by the A) total number of services produced in the economy. _ B) total number of goods and services produced in the economy. C) total number of goods produced in the economy. D) dollar value of all final goods and services produced in the economy. 10) Which of the following statements is true? A) Because unemployment is a microeconomic variable, it does not have any correlation with the business cycle. ‘ B) Over the business cycle, the economy's level of output and its unemployment rate move in ‘r opposite directions C) During expansions, aggregate output typically declines D) During recessions, the unemployment rate typically falls 11) The labor force is the sum of A) employed workers and discouraged workers. B) employed workers and the working age population. C) unemployed workers and the working age population. D) employed workers and unemployed workers. E) employed workers and individuals not looking for work. _ 12) Hurricane Katrina which hit the Gulf Coast region in August 2005, resulted inmassive flooding which destroyed large sections of New Orleans. Suppose prior to this event, New~ 6E1é5ii‘s’" was”) producing an output combination given by a point on its production possibilities frontier. How did the hurricane affect its production possibilities frontier? A) The production possibilities frontier shifts inwards. B) The production possibilities frontier no longer exists. C) New Orleans' output combination moved from a point on the frontier to a point given by one of. the intercepts. . D) The production possibilities frontier does not shift but there is a movement from a point on the frontier to a point inside the frontier. ‘ Expenditures (on Base year Quantities) .13) H, LE. 8)('¢ 9>.l2__. 10) 6 11) D Table 7—1 13) Refer to Table 7—1. Consider the table of production and price statistics for a small economy in 2008. If the economy only produces the four goods listed below, what is GDP for 2008? A) $24,000 B) $267,000 C) $428,000 D) $1,424 14) The production possibilities frontier model showsthat A) if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good. B) if consumers decide to buy more of a product its price will increase. C) a market economy is more efficient in producing goods and services than is a centrally planned economy. D) economic growth can only be achieved by free market economies. 15) An increase in cyclical unemployment will result in A) an increase in the unemployment rate. B) an increase in the natural rate of unemployment. C) a decrease in frictional unemployment. D) an increase in structural unemployment. 16) The condition of scarcity means that A) your will not incur an opportunity cost if you make the right choice B) choices must be made in the allocation of productive resources C) when the government produces something, there is no opportunity cost D) only a command economy can make efficient use of resources 17) Which of the following is a positive economic statement? A) US. firms should not be allowed to outsource production of goods and services. E) Everyone should live at the same standard of living. C) The government should close income tax loopholes. D) If the price of gasoline rises, a smaller quantity of it will be bought. 18) Home Depot sells new and used doors to contractors who build new homes. Home Depot also sells new and used doors to homeowners. Which of the following would be counted in GDP? A) the sale of a new door to TapKon construction for installation into a new home B) the sale of a used door to TapKon construction for installation into a new home C) the sale of a new door to homeowner D) the sale of a used door to a homeowner 19) An outward shift of a nation's production possibilities frontier can occur due to A) an increase in the labor force. B) a natural disaster like a hurricane or bad earthquake. C) a change in the amounts of one good desired. D) a reduction in unemployment. 17) D 18) C 19> 197 20) The most widely used measure of inflation is based on which of the following price indices? 20) C A) the GDP deflator B) the wholesale price index C) the consumer pn'ce index D) the producer price index Problems (12 points each) 1. The following data refers to an economy with two goods, milk and honey. Calculate real GDP for years 2006 and 2007 (base year is 2006). Be sure to show your work. Year Price of Quantity of Price of Quantity of - milk/quart milk iguaItsL hongL/jar bogey (jars) 2006 $1 1100 $2 500 2007 $2 1200 $4 800- Km/ aw? mm = /><//00 7‘ 9x530 = «52/00 Real 00!? 0200% = E‘flv‘a’séwc (2006,) ;< 5629007 :5 /x/200 +— ;x 5’66)": M g, “1677?. 2. The following table illustrates the tradeoff between making shirts and boots for the United States fully utilizing resources. CHOICE SHIRTS__g_millions)____ BOO’IflniillionsL A 5 ‘ o B 4 2 C 3 4 D 2 . 6 E 1 8 F 0 1o . . ,_ . q, - ' ‘1, _ '~' 2 : J ‘1 MA 1 " 1: ¢ 5% a ‘ a. Draw a production possibilities frontier that illustrates the tradeoff‘betwee’n producing shirts and boots. Label carefully. J. "' L‘. rv \9 5m“ 1-0 were b. Illustrate what will happen if there is an new technology in the production of bums. gfiflfliflf/I Mal/C * I’v/Wfi'ofi vet/Sim [3,9 The following table shows employment data reported by the Bureau of Labor Statistics for the United States in May 2005. Civilian Non—Institutional Population. - , . .~ ' . .. 3‘ .7 p (16 years and older) Labor Force Employed Unemployed ”225,6702000 149,201,000 . 141,571,000 7, 629 ,000 .1 a. Calculate the unemployment rate in 2005. Be sure to include the formula in your answer.‘ '1. 7‘ ¢ afiWfi/ayfd :' 4' 7%WMD .- W #5723" .3 0.07.57 " “Wow/000 45-70 000000 4;. DADSI " b. Calculate the civilian labor force participation rate based on these data. ll who)» Ame. ' M20100?) 40.4252 —— '— War/0'75 age/yu/mhn 5295970000 gr' [@0737]? Short Answer (6 points each) 1. Explain why the unemployment rate falls when the number of discouraged workers increases. Wm 1 W m WM 0/ mmf WW )ef (AR ; «5/ five/MK; ea /6 Mégm M/a 7 :xplmflfvmz Mmfl’z/ /: imam/9 :f;::/ W56 #20wa am? f/ayr may/a C’fll/ 5‘ M/Q :gj‘fl: mfléyffl/ 7‘13?“ 0m Mia/57?”, MW ’# Liam/£97661 J; 015.1 2. Give two reasons why GDP is an imperfect measure of economic well being. ’0 QLWW ' /)1 @2970 2 “201/” x x ~ 3. What is the difference between a nominal variable and a real variable? Give an example of a macroeconomic variable that we have discussed as real or nominal. Q ’ n 0m flu] abbé art/“1% ; Ella/WW 4. List and describe the three types of unemployment. 6910 f3 eacfl. 7:140:40ch ' SM.M Off] Catt“? VMé/I‘m/b A, C/ Problems (12 points each) 1. The following data refers to an economy with two goods, milk and honey. Calculate real GDP for years 2006 and 2007 (base year is 2006). Be sure to show your work. Year V Price of Quantity of Price of Quantity of milk/ . uart milk I uarts honey/jar honelg'arsL _ 2006 $1 1100 $2 600 2007 $2 1200 $4 1000 flag/J éD/D >0sz =”- / )6 Hera? 7’4 C9 Xgmv 2. 01—30% Mfivf 570/) 243?} :: gfafizfi/g bar/$1) (>005) X @3433?- 2 [r ”Wt 2 New 2. The following table illustrates the tradeoff between making shirts and boots for the United States fully utilizing resources. CHOICE SHIRTS Billions) BOOTS (EfllionsL A 5 0 B 2 C 4 D 6 . E 8 F 10 a. Draw a production possibilities frontier that illustrates the tradeoff between producing shirts and boots. Label carefully. b. Illustrate what will happen if there is an new technology in the production of boots. . ...
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