October 16, 2009 Fall Prelim 1

# October 16, 2009 Fall Prelim 1 - Name First Prelim ECON...

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Name: First Prelim ECON 1120 – Professor Steven Kyle Section Number: October 16, 2009 PART I : Multiple Choice, 10 points (each question is worth ½ point). 1. Using the figure above, which of the following would be most likely to cause the demand for macaroni and cheese to shift from D 0 to D 1 ? a) A decrease in the price of macaroni and cheese b) A decrease in the price of flour used to make macaroni and cheese c) A decrease in income, assuming macaroni and cheese is a normal good d) A decrease in the quantity demanded for macaroni and cheese Answer: C 2. Ithaca is expected to have an unusually cold winter, so demand for sweaters is high. In addition, a new sweater store is opening in the mall. How should the price and quantity of sweaters change? a) price rises, quantity rises b) price falls, quantity falls c) price ambiguous, quantity ambiguous d) price ambiguous, quantity rises Answer: D 3. Suppose cereal and milk are complements. What can we conclude? a) An increase in the price of milk will cause increase in the demand for cereal. b) An increase in the price of milk will cause decrease in the demand for cereal. c) An increase in the price of milk will cause increase in the supply for cereal. d) An increase in the price of milk will cause increase in the supply for cereal. Answer: B 1 Cartons of macaroni and cheese Q P 0 D 1 D 0

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Name: First Prelim ECON 1120 – Professor Steven Kyle Section Number: October 16, 2009 4. The government imposes a maximum price on apartments that is ABOVE the equilibrium price. You accurately predict that a) The law will have no economic impact b) The law will crate a surplus of apartments c) Renters will find that landlords start offering to furnish the apartments d) Landlords are less likely to do routine maintenance work in the apartments Answer: A 5. “Real” GDP refers to: a) Production of goods, differing from nominal GDP in that it excludes production of services b) A measure of GDP which adjusts for the effects of technological change c) A measure of GDP which adjusts for the effects of changing prices d) GDP measured in current (nominal) dollars e) None of the above Answer: C 6. What is the Federal Reserve’s primary responsibility? a) Provide deposit insurance to avoid bank panics b) It is the executor for government bond payments and redemptions c) Regulate foreign exchange transactions d) Control the money supply e) All of the above Answer: D 7. Bob, a car mechanic from Detroit, is out of a job since he his company has been transplanted to China. He had been frantically looking for a job and going to agencies every single day, but has since started staying home. Bob is part of the ____ .
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October 16, 2009 Fall Prelim 1 - Name First Prelim ECON...

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