ECON 252 Midterm 2 - Maymester 2010

ECON 252 Midterm 2 - Maymester 2010 - ECON252-002 Midterm...

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ECON252-002 Midterm II- Red Version Name: Student ID: (Please write down your name and student ID. Confirm you have the red scantron.) 1. Country A and country B are the same except country A currently has a lower level of capital. Assuming diminishing returns, if both countries increase their capital by 100 units and other factors that determine output are unchanged, then A) output in country A increases by more than in country B. B) output in country A increases by the same amount as in country B. C) output in country A increases by less than in country B. D) None of the above is necessarily correct. 2. Suppose that U.S. mining companies purchase German-made ore trucks at a reduced price. By itself, what effect will this purchase have on the GDP deflator and on the consumer price index? A) The consumer price index and the GDP deflator will both fall. B) The consumer price index and the GDP deflator will both be unaffected. C) The consumer price index will fall, and the GDP deflator will be unaffected. D) The consumer price index will be unaffected, and the GDP deflator will fall. 3. Your financial advisor tells you that if you earn the historical rate of return on a certain mutual fund, then in three years your $20,000 will grow to $23,152.50. What rate of interest does your financial advisor expect you to earn? A) 5 percent B) 6 percent C) 7 percent D) 8 percent 4. According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in taxes would A) raise both national saving and private saving. B) raise national saving and reduce private saving. C) leave national saving and private saving unchanged. D) leave national saving unchanged and reduce private saving.
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5. In a closed economy, national saving equals A) investment. B) income minus the sum of consumption and government purchases. C) private saving plus public saving. D) All of the above are correct. 6. In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the inflation rate in 2007 was 16 percent, then how much did a magazine cost in 2007? A) $1.87 B) $2.08 C) $2.32 D) $3.00 7. The concept of present value helps explain why A) investment decreases when the interest rate increases, and it also helps explain why the quantity of loanable funds demanded decreases when the interest rate increases. B) investment decreases when the interest rate increases, but it is of no help in explaining why the quantity of loanable funds demanded decreases when the interest rate increases. C) the quantity of loanable funds demanded decreases when the interest rate increases,
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ECON 252 Midterm 2 - Maymester 2010 - ECON252-002 Midterm...

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