Econ 252 - Midterm 2 - BLUE - Fall 2011

Econ 252 - Midterm 2 - BLUE - Fall 2011 - 1. Ceteris...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1. Ceteris paribus an increase in the savings rate will _________ the rate of growth in income in the short run, and lead to a _________ increase in labor productivity. a) increase, permanent c) increase, temporary b) decrease, permanent d) decrease, temporary 2. Caterpillar Inc is thinking of opening a new factory. The factory if built will increase profits by $300 million at the end of the seventh year. It costs $220 million today to build it. If you were the manager you would build the factory if the interest rate is a) no less than 5.96 percent. c) no greater than 5.96 percent. b) no less than 4.53 percent. d) no greater than 4.53 percent. The following table shows a partially completed balance sheet for Freedonia Bank Freedonia Bank Assets Liabilities and Capital Reserves Deposits 800 Securities 800 Debt 300 Loans 600 Capital 3. If the reserve ratio of Freedonia Bank is 25%, the leverage ratio of Freedonia Bank is: a) 4.8 b) 0.3125 c) 3.2 d) 2.8 e) None of the above are correct. 4. If Freedonia Bank’s assets fall in value by 15%, its bank capital a) falls by 48% b) falls by 42% c) rises by 48% d) remains unchanged e) None of the above are correct. 5. Martha is a risk averse person. Which of the following statement about Martha’s utility function is true? a) Her utility is decreasing in wealth. c) Her marginal utility is increasing in wealth. b) Her marginal utility is decreasing in wealth. d) Both (a) and (c) are correct. 6. Consider the following two scenarios . Scenario I : Tanya purchases fire insurance for her house, and then replaces the batteries in her smoke detectors less frequently. Scenario II: Tanya sells health insurance. She knows that if she raises her insurance premiums, her average cost per insured client will rise. Which of the following statements is correct? a) Scenario I is an example of moral hazard and Scenario II is an example of adverse selection. b) Scenario I is an example of adverse selection and Scenario II is an example of moral hazard. Exam 2 – BLUE Version Econ 252 – Fall 2011
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
c) Both of the scenarios are examples of adverse selection. d) Both of the scenarios are examples of moral hazard. e) None of the above are correct. 7. Suppose the adult population is 4 million. The number of people employed is 2.75 million. The labor force participation rate is 75%. What is the unemployment rate? a) 25% b) 8.33% c) 6.25% d) 9.75% e) 12.20% 8. Sam quits his job and returns to college to study full time to earn a Masters degree in economics. Other things the same, a) the unemployment rate increases and the labor force participation rate increases. b)
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/28/2012 for the course ECON 252 taught by Professor Robertholand during the Spring '08 term at Purdue University-West Lafayette.

Page1 / 5

Econ 252 - Midterm 2 - BLUE - Fall 2011 - 1. Ceteris...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online