Midterm 1 _ECN 1B Winter 2011_ _KEY_

Midterm 1 _ECN 1B Winter 2011_ _KEY_ - University of...

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Page 1 of 8 University of California, Davis Department of Economics ECN 1B: Midterm Examination 1 Winter 2011 B. Modjtahedi _____________________________________________________________________________ Question 1 Which of the following is a positive statement? A. Every U.S. citizen should get a free government-provided health insurance. B. The unemployment rate in the United Sates is unacceptably too high. C. Distribution of income in the United States has been getting more equal in the last few decades. D. We really need to pay more attention to the elementary school education in the United States. E. None of the above. Question 2 What is meant by “fallacy of composition”? A. Even though “micro” means small, the study of a small country is in the realm of macroeconomics. B. What is true for one decision maker may not be true for another decision maker. C. What is true for one individual in a group is also true for all the individuals comprising that group. D. What is true for one individual in a group may not be true for all the individuals comprising that group. E. None of the above Question 3 Susan, a real estate agent, buys a lot of gasoline to show homes to potential homebuyers. She drives approximately 100 miles per week. The price of gasoline increased from $3 per gallon to $4 per gallon. As a result she decided to drive less, because she had to pay more money for gasoline if she continued driving 100 miles per week. Such a motive to reduce consumption of a good due to a price increase is called: A. The income effect. B. The substitution effect. C. Scarcity. D. The “what” question. E. None of the above. Question 4 Suppose that, as in the 2007-08 recession, the government provides a one-time tax rebate of $1,000 to every taxpayer. Which of the following statements best describes the prediction of the life-cycle hypothesis about the effect of this policy on aggregate consumption spending? A. Since this is a transitory increase in disposable income, households will consume most of it. B. Since this is a transitory increase in disposable income, the very old will consume almost none of it, but the very young will consume almost all of it. As a result, aggregate consumption will increase. C. Since this is a transitory increase in disposable income, the very rich will consume almost none of it, but the very poor will consume almost all of it. As a result, aggregate consumption will increase. D. Since this is a transitory increase in disposable income, households will save most of it. E. None of the above.
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Page 2 of 8 Question 5 Generally speaking, what did Till Von Wachter and his co-workers find about the 1982 recession? A. Those who were laid off lost income by an average of 30% relative to those who did not lose their jobs, but in later years their incomes increased by more than 30% so that they made up for the lost incomes fairly quickly. B. Those who were laid off lost income by an average of 30% relative to those who did not
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This note was uploaded on 11/11/2011 for the course ECN 1B taught by Professor Michalowski during the Spring '11 term at UC Davis.

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Midterm 1 _ECN 1B Winter 2011_ _KEY_ - University of...

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