Econ 252 Exam 2 - BLUE - Spring 2011

# Econ 252 Exam 2 - BLUE - Spring 2011 - 1 Suppose GDP equals...

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1. Suppose GDP equals \$25 trillion, consumption equals \$15 trillion, the government spends \$5 trillion and has a budget surplus of \$1 trillion. Then a) taxes equals 4 trillion and investment equals 5 trillion. b) taxes equals 5 trillion and investment equals 6 trillion. c) taxes equals 6 trillion and investment equals 5 trillion. d) taxes equals 5 trillion and investment equals 5 trillion. 2. A fall in the interest rate will: a) increase the supply of money. b) decrease the level of investment. c) decrease the quantity supplied of loanable funds. d) increase the demand for loanable funds. 3. Economists measure the risk of an asset using: a) the range of possible returns of the asset. b) the standard deviation of returns of the asset. c) the spread between the median and mean returns of the asset. d) All of the above are correct. 4. Risk aversion can be explained by the expected utility hypothesis, where utility of wealth is subject to diminishing a) utility of wealth. b) marginal utility of wealth. c) average utility of wealth. d) None of the above are correct. 5. Advances in the field of genetics have allowed us to identify potential health risks by examining (testing) a person’s DNA. If we allow individuals to have their DNA tested, but do not allow insurance companies to see the results of such tests, we increase ________ problems for insurance companies. a) Risk Diversification. b) Adverse selection. c) Moral Hazard. d) Negative externality. 6. Ceteris paribus, a decrease in the rate of growth in the population will: a) decrease the long run rate of growth of output and decrease labor productivity. b) decrease labor productivity, and increase the long run rate of growth in output. c) increase labor productivity, and decrease the long run rate of growth in output. d) increase the long run rate of growth of output and increase labor productivity. 7. Ceteris paribus, an increase in the savings rate will: a) permanently decrease the long run rate of growth of output and decrease labor productivity. b) decrease labor productivity, but not permanently change the long run rate of growth in output. c)

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Econ 252 Exam 2 - BLUE - Spring 2011 - 1 Suppose GDP equals...

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