PRELIM_1_SPRING_2010_KEY (2)

# PRELIM_1_SPRING_2010_KEY (2) - Econ 1120 Spring 2010 PRELIM...

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1 Econ 1120 – Spring 2010 PRELIM I PROF. STEVE KYLE March 4, 2010 WRITE YOUR NAME ON EACH BLUEBOOK WRITE YOUR TA NAME ON EACH BLUEBOOK TA NAMES: Julia (Wednesday AM) JooYeon (Monday AM) Jeremy (Tuesday PM) Xinli (Thursday AM-PM) Ying (Wednesday AM) -------------------------------------------------------------------------------------------- INSTRUCTIONS: There are three sections in this exam: Part I: 20 multiple choice questions (0.5 point each) Part II: 3 short questions (10 points each) Part III: 1 essay question (10 points) ANSWER ALL QUESTIONS. TOTAL POINTS = 50. TOTAL TIME = 90 minutes HINTS: Read all questions carefully. Write legibly and remember to label all graphs and axes in diagrams. NO CELL PHONES. NO CALCULATORS. NO BOOKS. NO NOTES. NO HELP SHEETS. NO TALKING TO EACH OTHER. GOOD LUCK!

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PART I Multiple Choice Questions (20 Questions, each worth 0.5 point) 1. Fred Flugelman quit work to go back to school and get a Master's Degree in Engineering. After graduation he is only able to find part time work at a McDonalds for the first two years. He then finds a full time job once the economy picks up. During his two years at McDonalds: A) Fred was structurally unemployed B) Fred was frictionally unemployed C) Fred was cyclically unemployed D) Fred was not unemployed E) Fred was a discouraged worker 2. The leader of Atlantis hires you as an economic consultant. He is concerned that the output level in Atlantis is too low. He feels that it is necessary to increase output by \$200 billion. He tells you that the MPC is Atlantis is 0.8. Which of the following would be the best advice to give to the Atlantis president? A) Decrease taxes in Atlantis by \$40 billion B) Decrease taxes in Atlantis by \$50 billion C) Increase government spending in Atlantis by \$50 billion D) Increase government spending in Atlantis by \$160 billion E) Increase government spending in Atlantis by \$140 billion 3. Suppose that the consumer price index rises from 100 to 200. From this information we may conclude that A) Each person’s real income is cut in half. B) Consumer incomes are doubled. C) The prices in an average consumer’s market basket are doubled. D) All consumer goods prices are doubled. E) All prices in the economy are doubled. 4. In an economy with no taxes and no international trade, if the marginal propensity to consume is 0.8, which of the following is true? A) When consumption increases by \$5, investment increases by a maximum of \$1. B) When consumption increases by \$5, savings increase by a maximum of \$1. C) When investment increases by \$1, income increases by a maximum of \$5. D) When investment increases by \$1, consumption increases by a maximum of \$5. E)
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PRELIM_1_SPRING_2010_KEY (2) - Econ 1120 Spring 2010 PRELIM...

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