M1S1 - PRINCIPLES OF MACROECONOMICS MIDTERM #1, SAMPLE #1:...

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Unformatted text preview: PRINCIPLES OF MACROECONOMICS MIDTERM #1, SAMPLE #1: ANSWERS Duration - 1 hour Aids Allowed Non-programmable calculators only Time Allowed : 50 Minutes This total marks in this test are 50. The test is divided into two parts: Part I - problem format - is worth 40 marks (40 of the total mark of 50) Part II - multiple choice- is worth 10 marks (10 of the total mark of 50) (5 multiple choice questions worth 2 marks each) Show your work where applicable . Please use pen instead of pencil . Print your name and student number clearly on the front of the exam and on any loose pages. Name: . (Family Name) (Given Name) Student # : . There are 5 pages to the exam.- 1/5 - Principles of Macroeconomics: Midterm #1, Sample 1 Answers Part I: Place your answers (and work where necessary) in the space provided. Clearly label all axes, curves, and points. 1. Prices Indices (15 marks) January, 1995 December, 2005 Price/unit Quantity Price/unit Quantity Rice (kilos) $1.40 30 $1.80 24 Chicken (kilos) $2.20 16 $2.00 20 The above table gives data for the price/unit and quantity of Rice (kilos) and Chicken (kilos) consumed by the average family in January, 1995, and December, 2005. Assuming that 1995 is the base year, calculate the following values. Show your work! a) nominal student consumption in 1995 (1 mark) 1 mark: = $77.20 from 1.40*30 + 2.20*16 b) the consumer price index for December, 2005 (3 marks) 1 mark: correct denominator = $77.20 from 1.40*30 + 2.20*16 (or above) 1 mark: correct numerator = $86 from 1.80*30 + 2.00*16 1 mark: correct indes = 111.4 (or 111) from 100*86/77.20 c) real consumption in December, 2005 relative to January, 1995 according to the consumer price index. (3 marks) 1 mark: correct numerator (nominal income) = 83.2 from 1.80*24 + 2*20 1 mark: correct setup = 100*83.2/111.4 1 mark: correct answer = $74.7 (accept $75) d) the amount of inflation between 1995 and 2005 relative to 1995 using CPI (1 mark) 1 mark: 11.4% (or 11%) e) the GDP deflator for December, 2005 given January, 1995, as the base year (3 marks) 1 mark: numerator = 83.2 from 1.80*24 + 2*20 1 mark: denominator = 77.6 1 mark: denominator = 77....
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M1S1 - PRINCIPLES OF MACROECONOMICS MIDTERM #1, SAMPLE #1:...

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