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Midterm #2

# Midterm #2 - YOUR NAME YOUR R.I.s NAME Econ 002 INTRO MACRO...

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YOUR NAME: ______________________________________ YOUR R.I.’s NAME :______________ __________________________________ Page 1 of 8 Econ 002 – INTRO MACRO – Prof. Luca Bossi – March 23, 2011 MIDTERM #2 SUGGESTED SOLUTIONS YOUR NAME: ______________________________________ YOUR PENN STUDENT NUMBER: ____________________________ YOUR R.I.’s NAME : ______________________________________ 1) If an economy with constant returns to scale were to double its physical capital stock, its available natural resources, and its human capital, but leave the size of the labor force the same, a. its output would stay the same and so would its productivity. b. its output and productivity would increase, but less than double. c. its output and productivity would increase by more than double. d. None of the above is correct. 2) Suppose that real GDP grew more in Country A than in Country B last year. 3) Real Foods produced 400,000 cans of diced tomatoes in 2007 and 460,000 cans of diced tomatoes in 2008. They employed the same number of labor hours each year. Relative to their productivity in 2007, their productivity in 2008 was 4) Suppose a country imposes new restrictions on how many hours people can work. If these restrictions reduce the total number of hours worked in the economy, but all other factors that determine output are held fixed, then 5) Suppose that there are diminishing returns to capital. Suppose also that two countries are the same except one has more capital per worker and so it has more real GDP per worker than the other. Finally, suppose that the saving rate in both countries increases from 4 percent to 7 percent. Over the next ten years we would expect that

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YOUR NAME: ______________________________________ YOUR R.I.’s NAME :______________ __________________________________ Page 2 of 8 a. the growth rate will not change in either country. b. the country that started with less capital per worker will grow faster. c. the country that started with more capital per worker will grow faster. d. both countries will grow and at the same rate. 6) Suppose the market for loanable funds is in equilibrium. Given the numbers below, determine the quantity of loanable funds demanded. GDP \$100 billion Consumption \$65 billion Taxes Net of Transfers \$15 billion Government Spending \$20 billion
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