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Econ 320  001
Final Exam, May 2, 2008
The exam has a total of 45 questions (400 points). You will have three hours to complete the exam. Good
Luck!
Print your Name_______________________________
Sign the honor Pledge affirming that you have neither given nor received aid on this exam and have
complied with all of the rules of this exam.
Signature______________________________________
Turn this sheet and the scantron sheet in with your answers.
I. Multiple Choice (50%)
Instructions:
For
questions
140,
mark the letter for the best answer choice for each question on the computer
readable (scantron) answer sheet. Each question in this section is equally weighted.
Read each question carefully
1. Nominal GDP measures the value of goods and services in ______ prices, while real
GDP measures the value of goods and services in ______ prices.
A) foreign; domestic
B) domestic; foreign
C) current; constant
D) constant; current
2. An increase in the price of goods bought only by firms and the government will show up
in:
A) the CPI but not in the GDP deflator.
B) the GDP deflator but not in the CPI.
C) both the CPI and the GDP deflator.
D) neither the CPI nor the GDP deflator.
3. If an increase of an equal percentage in all factors of production results in an increase in
output of the same percentage, then a production function has the property called:
A) constant returns to scale.
B) increasing returns to scale.
C) constant marginal product of labor.
D) decreasing returns to scale.
4. If the production function describing an economy is
Y
= 10
K
.25
L
.75
(where capital is 16
and labor is 81), then the total factor payment to labor (i.e. total labor income):
A) 135
B) 240
C) 405
D) 540
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5. In the classical model with fixed output, the supply and demand for goods and services
are balanced by:
A) government spending.
B) taxes.
C) fiscal policy.
D) the interest rate.
6. If disposable income is 4,000, consumption is 3,500, government spending is 1,000, and
tax revenues are 800, national saving is equal to:
A) 300.
B) 500.
C) 700.
D) 1,000.
7. According to the quantity theory of money (when velocity is constant), the percentage
change in
P
is approximately equal to the percentage change in:
A)
M
.
B)
Y
minus percentage change in
M
.
C)
M
minus percentage change in
Y
.
D)
M
minus percentage change in
P
.
8. If the real interest rate declines by 1 percent and the inflation rate increases by 2 percent,
the nominal interest rate must:
A) increase by 2 percent.
B) increase by 1 percent.
C) remain constant.
D) decrease by 1 percent.
9. The additional cost of an unanticipated inflation (which is not caused by anticipated
inflation) is:
A) menu costs.
B) shoeleather costs.
C) unfair tax treatment.
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 Fall '08
 NEDITA
 Government, Inflation, net exports

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