Midterm 2 Practice 2011

# Midterm 2 Practice 2011 - Econ 352 Intermediate...

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Econ 352 YiLi Chien Intermediate Macroeconomics Spring 2011 2 nd Midterm Practice Questions Part One (25 pts) 1. (8 pts) What is the definition of unemployment rate? List the cause of frictional unemployment and structural unemployment respectively. 2. (10 pts) Consider an economy that produces pizza, beer, and breweries. Pizza and beer are consumption goods demanded by college students, breweries are an investment good demanded by beer producers. Quantities and prices can be read off the following table. 2007 2008 Q 2007 P 2007 Q 2008 P 2008 Pizza 15 10 10 20 Beer 30 15 40 10 Breweries 1 100 1 100 For year 2008, compute the GDP deflator and CPI. For computation of real GDP and the GDP deflator, use the fixed base-year method with base year 2007. Also, for computing the CPI uses 2007 as the base year in which the consumption basket is determined (by actual consumption). 3. (7 pts) Show that this Cobb-Douglas production function, 1 Y AK L θθ = , is constant return to scale. Part Two (75pts) Instruction: For each question, mark your answer on the scantron. Note that you must use pencil no. 2. (3 points each) 1. The GDP data announced by Bureau of Economics Analysis is a ______ data. A. weekly B. bi-weekly C. monthly

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D. quarterly 2. In country A, the velocity of money is constant. Real GDP grows by 3 percent per year, the money stock grows by 6 percent per year, and the nominal interest rate is 4 percent. Then, the real interest rate is: A. 1% B. 2% C. 3% D. 4% 3. When you sell your investment in equity by \$1000 dollars on stock market, GDP ( GDP= C+I+G+X-M ) A. increases B. decreases C. is not changed D. increases or decreases, depending on the year the investment was made 4. With a Cobb-Douglas production function, the share of output going to labor A. decreases as the amount of labor increases.
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## This note was uploaded on 04/02/2012 for the course ECON 352 taught by Professor Staff during the Fall '08 term at Purdue.

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Midterm 2 Practice 2011 - Econ 352 Intermediate...

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