mt1-f2003 - Midterm #1 Econ 100B 125 points total; 62...

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M IDTERM #1 (F ALL 2003) P AGE 1 OF 2 Midterm #1 Fall 2003 Econ 100B Questions 125 points total; 62 minutes total. Question 1 (16 points; 8 minutes) A. (8 points) Explain why, for the economy as a whole, actual expenditure always equals output. B. (8 points) When retirees receive their monthly Social Security checks from the U.S. government, this is not recorded as part of GDP. Why not? In your answer, be sure to discuss the link between GDP and employment. Question 2 (16 points; 8 minutes) A. (8 points) Assume labor efficiency is constant. Using the axes at right, draw the graph that shows how to find the steady-state balanced-growth equilibrium combination of and . Label all curves and axes. B. (8 points) In the Cobb-Douglas production function, " measures the extent of diminishing returns to investment in capital. Explain what it means for returns to investment to diminish. Question 3 (20 points; 10 minutes) In the wake of 9-11, the government is making it more difficult to immigrate into the U.S. Suppose that this change in policy is a permanent change that is not reversed for several
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mt1-f2003 - Midterm #1 Econ 100B 125 points total; 62...

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