exam1f05 - Econ 201 Fall 2005 MIDTERM EXAM 1 Prof. Shea...

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Econ 201 MIDTERM EXAM 1 Prof. Shea Fall 2005 DIRECTIONS: read each question CAREFULLY and choose the best answer. Fill in the appropriate bubble on your answer sheets completely using a number 2 pencil. You may write on your exam. Answer all questions; there is no penalty for guessing wrong. Please feel free to ask me or the TA for help if you are uncertain about the wording or meaning of a question. There are 30 questions. 1. Which of the following statements is true? (I) There have been no deflations in the US since 1950. (I) There have been no disinflations in the US since 1950. (a) I but not II (b) II but not I (c) both I and II (d) neither I nor II 2. Suppose I buy two bottles of newly bottled wine. The first bottle is a French wine that I buy from an American liquor store. This store buys the bottle from a French winery for $50 and resells it to me for $120. The second bottle is a California (American) wine that I buy from a Canadian liquor store. This store buys the bottle from the American winery for $75 and resells it to me for $135. How much does US GDP rise as a result of these transactions? (a) $125 (b) $135 (c) $145 (d) $205 3. The minimum wage in the United States is currently $5.15 per hour. Some in Congress have proposed raising the minimum wage to $7.00 per hour. Others have argued that raising the minimum wage is a bad idea because it will raise unemployment. What type of unemployment is most likely to be increased by raising the minimum wage according to standard economic theory? (a) Frictional unemployment (b) Cyclical unemployment (c) Structural unemployment (d) Raising the minimum wage will not raise unemployment. 4. "A rising per-capita real GDP is always a good thing. Government policy should always strive to maximize the growth rate of per-capita real GDP." Which of the following is in principle a valid counter-example to this statement? (I) Higher inflation will automatically increase the growth rate of per capita real GDP, but higher inflation is not a good thing; (II) Governments could increase economic growth by forcing their citizens to save and invest more, but that might not make people happier. (a) I but not II (b) II but not I (c) both I and II (d) neither I nor II
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For questions 5-7, consider the following table of hypothetical numbers. Assume that that g(NGDP) and g(POPULATION) are long run trend growth rates of NGDP and POPULATION, and that the inflation rate listed is a long-run trend rate that is anticipated by everyone in the economy. COUNTRY g(NGDP) INFLATION g(POPULATION) India 7.5% 3.0% 2.0% Ireland 10.0% 6.5% 0.5% China 9.0% 4.0% 3.0% US 4.5% 2.0% 0.0% 5. In which country are living standards rising the most quickly, according to the numbers in the table above? (a) India
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This note was uploaded on 04/07/2008 for the course ECON 201 taught by Professor Shea during the Spring '08 term at Maryland.

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exam1f05 - Econ 201 Fall 2005 MIDTERM EXAM 1 Prof. Shea...

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