PSU ID#: 925851266
Econ 102 Midterm
October 5, 2014
a) Give an example of a normative economic statement.
The government should raise minimum wage in order to boost the economy.
b) Define each of the following terms:
September 10, 2014
Give an example of a normative economic statement.
Higher interest rates will reduce house prices.
Define each of the following terms:
Opportunity cost: The cost of the alternative that you pass up in order
September 27, 2014
1. Use the graph below to answer the following questions. (26 points)
a. What is the absolute value of the price elasticity of demand between P=100 and P=80? (5
% change in Price: (100-80)/(100+
1. You earn $500 a month, currently have $200 in currency, $100 in your checking account,
$2,000 in your savings accounts, $3,000 worth of illiquid assets and $1,000 of debt.
a. M1 includes currency, the value of all checking account deposits, and the val
1. Imagine that Kristy deposits $10,000 of currency into her checking account deposit at
Bank A and that the required reserve ratio is 20%. As a result of Kristys deposit,
a. Bank A's reserves immediately increase by $10,000. Reserves are deposits that th
1. Two changes to the economy that would cause the demand curve for money to shift to the
right from MD1 to MD2 would be an increase in the real GDP or an increase in the price
level. An increase in the real GDP means that there is an increase in the amou
1. Production of the Ford F-150 trucks is likely to fluctuate more than the real GDP does
during the business cycle. Ford F-150 trucks are a consumer durable good.
Consumer durable goods are expensive, but can last for more than three years.
During the ex
a. The equilibrium price of corn is $15 and the quantity is 15,000 bushels.
b. If the prevailing price is $9 per bushel, there is a shortage in the market because 22,000
bushels were demanded and only 9,000 bushels were supplied.
c. The quantity of the sh
1. Suppose you buy a house for $250,000. One year later, the market price for the house has
fallen to $200,000. What is the return on your investment in the house if you made a
down payment of 10 percent and took out a mortgage loan for the other 90 perce
1. Number of unemployed X 100 = Unemployment rate
_1000_ X 100 = 9.09 9.1%
The equation: Number of unemployed X 100 is used to find the unemployment rate.
The labor force is the sum of the employed and the unemployed:
1. Nominal GDP = (50 x 35) + (40 x 75) + (1000 x 4) = 8,750
The nominal GDP of this simple economy is 8,750. The value of the coffee beans
Dr. Paul Kagundu
1) a) Micro
2) a) Positive
3) b) This is true because Mike paid for the ticket and Jim did not. Therefore, Mi