practice midterm 1 AK

# practice midterm 1 AK - Sonoma State University Department...

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Sonoma State University Department of Economics ECN 304 Florence Bouvet Practice Midterm 1-Answer Key Multiple Choice: Choose the best answer. 1) The consumer price index a) Measures the average price of all goods and services produced in the economy. b) Ignores imported goods. c) tends to understate the level of inflation because of substitution bias. d) None of the above. 2) All of the following actions are classified as investment in macroeconomics, except: a) You buy shares of stock in Intel (a company) b) Intel builds a new factory in Sacramento. c) Café Roma buys a new espresso machine. d) Your uncle buys a new home. 3) According to the neoclassical model of the factors market, a rise in supply of labor will ____ the real rental rate on capital and ____ the real wage: a) raise, raise b) raise, lower c) lower, raise d) lower, lower 4) In the long run, the level of national income in an economy is determined by its: a) factors of production and production function. b) real and nominal interest rate. c) government budget surplus or deficit. d) rate of economic and accounting profit. 5) Which of the following is not a stock variable? a) the government debt b) the labor force. c) the amount of money held by the public. d) inventory investment.

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For questions 6-7, assume the following information for an economy that produces two goods. Use 2002 as your base year. 2002 2003 Beach towels Price Quantity \$5 3 \$6 2 Suntan lotion Price Quantity \$3 8 \$4 10 6) The GDP deflator for 2003 is: a) 40/52. b) 40/50. c) 50/39 d) 52/40 . GDP Deflator for 2003 = (Nominal GDP 2003)/(Real GDP 2003)= (6x2 + 4x10)/(5x2+10x3)= 52/40 7) The CPI for 2003 is: a) 40/52. b) 40/50. c) 50/39 d) 52/40. CPI 2003 = (P2003 x Q2002)/(P2002 x Q2002) = (3x6 +8x4)/(3x5 +8x3)= 50/39 8) Suppose that a Canadian citizen crosses the border each day to work in the United States. Her income from this job would be counted in a) US GNP and Canadian GNP b) US GNP and Canadian GDP c) US GDP and Canadian GNP d) US GDP and Canadian GDP 9) the returns to scale in the production function Y = K 0.5 L 0.5 are a) decreasing b) increasing c) constant d) subject to wide fluctuations
10) If the real interest rate rises, then the quantity of investment demanded a) will fall b) will not change c)will rise d) could rise or fall 11) All of the following transactions that took place in 2009 would be included in GDP

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## This note was uploaded on 03/08/2011 for the course ECON 304 taught by Professor Eyler during the Spring '07 term at Sonoma.

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practice midterm 1 AK - Sonoma State University Department...

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