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Unformatted text preview: Economics 381 Fall 2009 Section 5 Midterm 1 Instructor Matt Butler Questions 1 through 10 are multiple choice questions. You may mark only one answer . If more than one answer is marked the question will receive zero points. Each multiple choice question is worth 5 points. There are two short answer questions worth 25 points each. The exam is worth a total of 100 points. You must SHOW YOUR WORK or PROVIDE EXPLANATIONS for each short answer question. Good luck and remember that this test will be part of your curved grade. If you struggle with one or more problems it is likely that other students in the class will also struggle. Page 1 of 9 Multiple Choice Questions (50 Points) 1. Use the classical model for a closed economy, but assume that consumption decreases, other things being equal, when the real interest rate rises. If there is a technology that leads to an increase in investment demand: a. investment increases and the interest rate rises b. investment is unchanged and the interest rate rises c. investment and the interest rate are both unchanged d. investment decreases and the interest rate rises 2. An example of increasing returns to scale is when capital and labor inputs: a. both increase 10 percent and output increases 5 percent b. both increase 10 percent and output increases 10 percent c. both increase 5 percent and output increases 10 percentc....
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 Winter '08
 Staff
 Economics, Macroeconomics, Inflation, real exchange rate, Matt Butler

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