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Sample Exam Questions

# Sample Exam Questions - Principles of Macroeconomics...

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Principles of Macroeconomics, Deskins Sample Exam Questions These questions are taken from exams I gave at Creighton from 2005 through 2007. They will aid in preparation for the written half of the exams. Multiple choice questions comprise the second half of the exams; our quizzes will aid in preparation for that half. Chapter 5 1. Assume the following depicts the U.S. economy: Year Quantity-Boats Quantity-CDs Price-Boats Price-CDs 2003 20 50 \$1,000 \$10 2004 30 60 \$1,500 \$12 Calculate nominal GDP for both years. What was the growth rate of real GDP between 2003 and 2004? 2. List the five individual components of GDP. Give an example of an expenditure that would fall into each category. Which category is the biggest? 3. Discuss two imperfections with real GDP as a measure of economic well-being? 4. In class we discussed how real GDP fluctuates over time. Please draw a diagram that illustrates the business cycle (time on one axis and economic activity on the other). Now point out the peaks and troughs of the business cycle. How are these points typically characterized in terms of unemployment and inflation? 5. Which of the following are likely to increase measured GDP and which are likely to reduce it? a) The fraction of women working outside the home increases. b) Higher tax rates cause people to hide more of their income. 6. If the Bureau of Economic Analysis added up the value of every good and service sold during the year, would the total be larger or smaller than GDP? Why?

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Deskins, Sample Exam Questions 2 Chapter 6 1. Discuss two imperfections with the CPI as a measure of the cost of living. 2. Joe, who quit smoking in 1995, provided the following answer to why he q uit: “I quit because it was just getting too expensive. I started smoking in 1965 when cigarettes were only 45 cents/pack. The last pack I bought was \$2 and I just couldn’t justify spending more than four times on cigarettes as I used to” Assume that t he CPI was 31.5 in 1965 and was 152.4 in 1995. What is wrong with Joe’s reasoning? Explain fully (using numbers as well as a written description). Chapter 10 1. Assume the following depicts the U.S. economy: 2003 2004 Adult Population 168 171 Number Unemployed 7 9 Number Employed 105 109 What is the labor force participation rate for 2003? What is the growth rate in the unemployment rate from 2003 to 2004? 2. Please explain why every economy experiences unemployment, even in the long-run. In other words, why does unemployment exist even when economies experience strong growth? Your answer should center on the different types of unemployment and you should discuss the natural rate of unemployment. 3. Please define the natural rate of unemployment. Please list and briefly describe the three types of unemployment that form the natural rate? What is cyclical unemployment? 4. Please explain what economists mean when they say that a relatively more generous unemployment insurance program enhances equity in society at the cost of efficiency, i.e., it represents a tradeoff for equity over efficiency.
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