exam1s07 - Econ 201 Prof. Shea MIDTERM EXAM 1 Spring 2007...

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Econ 201 MIDTERM EXAM 1 Spring 2007 Prof. Shea DIRECTIONS: read all questions CAREFULLY. Choose the best answer and mark the bubble sheets with a pencil. Answer all questions; there is no penalty for guessing. You may write on the exam or scratch paper. You may ask for help if a question is unclear. Questions 1-3 use the following information. Suppose a dairy farmer in the US sells $5 million worth of milk to a grocery store chain located in the US, and another $3 million worth of milk to a grocery store chain located in Canada. Also, the same farmer sells $2 million of milk to a cheese manufacturer located in the US, and another $2 million to a cheese manufacturer located in Canada. The US grocery store chain sells the milk to US households for $8 million. The grocery store chain located in Canada sells the milk to Canadian households for $5 million. The cheese manufacturer in the US turns the milk into cheese and sells it to US consumers for $4 million, and the cheese manufacturer in Canada turns the milk into cheese and sells it to Canadian consumers for $3 million. 1. As a result of these transactions, US GDP rises by (a) $12 million (b) $17 million (c) $20 million (d) $24 million 2. As a result of these transactions, Canada’s GDP rises by (a) zero (b) $2 million (c) $3 million (d) $8 million 3. Which of the following transactions reported above would be counted directly in US GDP? (I) The farmer sells $2 million of milk to a cheese manufacturer located in Canada; (II) The farmer sells $2 million of milk to a cheese manufacturer in the US. (a) I but not II (b) II but not I (c) both I and II (d) neither I nor II
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4. Fill in the blanks. Married women typically have higher rates of unemployment than married men because they have higher rates of _________ unemployment, while men who graduated from college typically have lower unemployment rates than men who did not finish high school because they have lower rates of ___________ unemployment. (a) frictional, frictional (b) structural, cyclical (c) cyclical, cyclical (d) frictional, structural Questions 5-8 are based on the following information. Consider the following table of long run trend growth rates of nominal GDP and population, along with the long run average inflation rate, for four fictional countries: Country________g(NGDP)____Inflation_Rate______g(POPULATION)__ Garyland 10% 4% 2% Krzyzewskistan 8% 1% 5% Fresiana 6% 3% 4% Toliveria 12% 6% 3% 5. Assuming these trend growth rates continue into the indefinite future, which country will eventually have the highest living standards? (a) Garyland (b) Krzyzewskistan (c) Fresiana (d) Toliveria 6. In which country will the price level double roughly every 12 years? (a) Garyland
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exam1s07 - Econ 201 Prof. Shea MIDTERM EXAM 1 Spring 2007...

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