2007W - Solution to Test 1 (ECO209) - November 2, 2007

# 2007W - Solution to Test 1 (ECO209) - November 2, 2007 -...

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Page 1 of 10 Department of Economics Prof. Gustavo Indart University of Toronto November 2, 2007 ECO 209Y MACROECONOMIC THEORY AND POLICY Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER Circle your section of the course : L0101 L0301 L0401 M – 2-4 W – 2-4 R – 2-4 INSTRUCTIONS : 1. The total time for this test is 1 hour and 50 minutes. 2. This question booklet has 10 pages. 3. Answer all questions in the space provided on question sheet; if space is not sufficient, continue on the back of the previous page. 4. Aids allowed: a simple , non-programmable calculator. 5. Use pen instead of pencil . DO NOT WRITE IN THIS SPACE Part I /21 Part II /14 Part III 1. /10 2. /10 3. /10 4. /10 TOTAL /75 SOLUTION

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Page 2 of 10 PART I (21 marks) Instructions : Enter your answer to each question in the table below. Only the answer recorded in the table will be marked. Table cells left blank will receive a zero mark for that question. Each question is worth 3 marks. No deductions will be made for incorrect answers. 1 2 3 4 5 6 7 B A E C D C C 1. Alcan Co. produces 1,000 tons of aluminium. Aluminium sells for \$60 per ton. Alcan buys \$15,000 worth of bauxite, the raw material needed to produce aluminium; pays wages of \$20,000; buys \$10,000 worth of coal, which is needed to produce the aluminium; pays \$5,000 in interest to the Royal Bank; and pays \$4,000 in taxes. Alcan’s contribution to GDP is A) \$29,000. B) \$35,000. C) \$45,000. D) \$60,000. E) None of the above. 2. Assume a Hyundai dealership in Toronto imported 40 cars from South Korea at a cost of \$15,000 per car in July of 2006, and by December 31, 2006 has sold 20 of these cars at a price of \$20,000 each. The remaining cars were sold in January 2007 at a price of \$18,000 each. The effect of these transactions on GDP in the year 2006 is A) \$100,000. B) \$160,000. C) \$400,000. D) \$200,000. E) None of the above. 3. Which of the following is included in the measures of the investment component of aggregate expenditure in the national accounts? A) Ontario’s Northern Telecom builds a new plant in Mexico City. B) The Royal Bank of Canada purchases a small trust company in Manitoba. C) General Motors (Canada) issues new shares to raise the capital required to build a new plant in Oshawa. D) The University of Toronto sells the north section of the Varsity Stadium to a private developer who plans to build a new condominium on the site. E) None of the above.
Page 3 of 10 4. Which of the following statement is correct with respect to Gross National Product (GNP)? A) GNP measures the value of production that is located in Canada. B) GNP measures the value of income that is earned from production in Canada. C) GNP measures the income accruing to Canadian residents. D) GNP excludes Canadian government purchases. E) GNP includes the value of illegal activities in Canada. 5. Suppose that an economy produces only apples, bananas, and oranges, and that price (in dollars) and quantity (in pounds) data are given in the table below.

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## This note was uploaded on 04/26/2011 for the course ECON 209 taught by Professor Indart during the Fall '06 term at University of Toronto.

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2007W - Solution to Test 1 (ECO209) - November 2, 2007 -...

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