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W2008 - Solution to Test 1 - ECO209 - October 24, 2008

# W2008 - Solution to Test 1 - ECO209 - October 24, 2008 -...

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Page 1 of 11 Department of Economics Prof. Gustavo Indart University of Toronto October 24, 2008 ECO 209Y MACROECONOMIC THEORY AND POLICY Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER Circle your section of the course : L5101 L0301 L0401 M – 6-8 W – 2-4 R – 2-4 INSTRUCTIONS : 1. The total time for this test is 1 hour and 50 minutes. 2. Aids allowed: a simple , non-programmable calculator. 3. Use pen instead of pencil . DO NOT WRITE IN THIS SPACE Part I /21 Part II /19 Part III 1. /10 2. /10 3. /10 4. /10 TOTAL /80 A SOLUTIONS

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Page 2 of 11 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. A 1 2 3 4 5 6 7 C E B A B D E B 1 2 3 4 5 6 7 A E D C A B D C 1 2 3 4 5 6 7 B E C B C A C 1. 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 . Year 2006 Year 2007 Good Quantity Price Quantity Price Apples 3,000 \$2 4,000 \$3 Bananas 6,000 \$3 7,000 \$2 Oranges 8,000 \$4 6,000 \$5 If 2006 is the base year, the value of the GDP Deflator in 2007 was approximately A) 94.6. B) 100.0. C) 105.7. D) 108.9. E) None of the above 2. For GDP purposes, which of the following statements regarding investment is correct?
Page 3 of 11 3. Suppose that in 2007, ABC Corporation produced \$6 million worth of school desks but was able to sell only \$5 million worth during that year. Is this \$1 million of unsold school desks part of GDP for 2007? 4. If investment exceeds private saving by \$22 billion and government spending exceeds tax revenues by \$34 billion, then

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