Download Spring 2014 May 16, 2014 Econ 100 Midterm Examination #2 Name

Spring 2014
May 16, 2014
Econ 100
Midterm Examination #2
Name: ______________________________________________
FOR FALL 2014 IGNORE QUESTIONS 42 to 50.
Instructions :
 Please: Absolutely, positively, definitely, NO QUESTIONS during the exam. NO EXCEPTIONS.
 The exam is 70 minutes. It is a closed-book exam. Please store away all your notes notebooks and
books in your bag or under your seat.
 You cannot leave the classroom for any reason during the exam.
 Cheating will result in F grade and disciplinary action.
 Please do not look at or copy from another student’s exam paper, let another student copy from your
exam paper. Please do not talk or otherwise communicate with another student in any way during the
exam.
 You can only have your pocket calculator, pencil and eraser with you. Put everything else to a place
that you cannot reach. Use of mobile phones, or any other electronic devices is not allowed during the
exam. Please turn off your phone and put it away during the exam.
MULTIPLE CHOICE QUESTIONS
There are 50 multiple choice questions. For each question you will receive 2 points if your
answer is correct, 0 point if it is wrong, and 1/2 point if you leave it blank.
Good Luck!
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1
GDP is defined as
a.
the market value of all final goods produced within a country in a given period of time.
b.
the market value of all goods and services produced within a country in a given period of time.
c.
the market value of all final goods and services produced within a country in a given period of time.
d.
the market value of all final goods and services produced by the citizens of a country, regardless of where they
are living, in a given period of time.
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2
A steel company sells some steel to a bicycle company for $100. The bicycle company uses the steel to produce
a bicycle, which it sells for $200. Taken together, these two transactions contribute
a.
$100 to GDP.
b.
$200 to GDP.
c.
$200 and $300 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle.
d.
$300 to GDP.
3
An American company operates a fast food restaurant in Romania. Which of the following statements is
accurate?
a.
The value of the goods and services produced by the restaurant is included in both Romanian GDP and U.S.
GDP.
b.
One-half of the value of the goods and services produced by the restaurant is included in Romanian GDP, and
the other one-half of the value is included in U.S. GDP.
c.
The value of the goods and services produced by the restaurant is included in Romanian GDP, but not in U.S.
GDP.
d.
The value of the goods and services produced by the restaurant is included in U.S. GDP, but not in Romanian
GDP.
4
a.
b.
c.
d.
When we calculate the GDP, investment is spending on
stocks, bonds, and other financial assets.
real estate and financial assets.
new capital equipment, inventories, and structures, including new housing.
capital equipment, inventories, and structures, excluding household purchases of new housing.
5
For a certain economy in 2005, GDP was $2,000; investment was $400; government purchases were $300; and
net exports were $70. It follows that consumption was
a.
$1,370.
b.
$1,330.
c.
$1,230.
d.
60 percent of GDP.
6
A country reported nominal GDP of $200 billion in 2006 and $180 billion in 2005; it reported a GDP deflator of
125 in 2006 and 105 in 2005. Between 2005 and 2006,
a.
real output and the price level both rose.
b.
real output rose and the price level fell.
c.
real output fell and the price level rose.
d.
real output and the price level both fell.
7
a.
b.
c.
d.
The Nominal GDP for 2007 is
$900.
$1,100.
$1,250.
$1,350.
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8
a.
b.
c.
d.
The Nominal GDP is
$680 for 2006, and $1,200 for 2008.
$760 for 2006, and $1,000 for 2008.
$760 for 2006, and $1,600 for 2008.
$960 for 2006, and $1,300 for 2008.
9
a.
b.
c.
d.
Using 2006 as the base year, for 2007,
real GDP is $880 and the GDP deflator is 80.
real GDP is $880 and the GDP deflator is 125.
real GDP is $950 and the GDP deflator is 95.
real GDP is $950 and the GDP deflator is 116.
10
a.
b.
c.
d.
Using 2007 as the base year, for 2006,
real GDP is $760 and the GDP deflator is 100.
real GDP is $760 and the GDP deflator is 125.
real GDP is $880 and the GDP deflator is 80.
real GDP is $950 and the GDP deflator is 80.
11
Using the GDP deflator to measure the average level of prices and using 2006 as the base year, the economy’s
inflation rate is
a.
20 percent for 2007 and 12.5 percent for 2008.
b.
20 percent for 2007 and 30 percent for 2008.
c.
25 percent for 2007 and 28 percent for 2008.
d.
44.7 percent for 2007 and 45.5 percent for 2008.
12
a.
b.
c.
d.
Economists use the consumer price index to measure changes in the
costs of production
cost of living.
relative prices of consumer goods.
production of consumer goods.
13
In the basket of goods that is used by the TUIK to compute the consumer price index for Turkey, the three most
important categories of consumer spending are
a.
housing, transportation, and entertainment.
b.
food & beverages, and housing, transportation.
c.
housing, medical care, and food & beverages.
d.
education, medical care, and food & beverages.
14
Which goods and services are used to construct the CPI?
a.
a random sample of all goods and services produced in the economy
b.
the goods and services that are typically bought by consumers as determined by government surveys
c.
only food, clothing, transportation, entertainment, and education
d.
the least expensive and the most expensive goods and services in each major category of consumer
expenditures
15
Between October 2001 and October 2002, the CPI in Canada rose from 116.5 to 119.8. In Mexico it rose from
97.2 to 102.3. What were the inflation rates for Canada and Mexico over this one-year period?
a.
3.3 percent for Canada and 6.7 percent for Mexico
b.
3.3 percent for Canada and 5.2 percent for Mexico
c.
2.8 percent for Canada and 6.7 percent for Mexico
d.
2.8 percent for Canada and 5.2 percent for Mexico
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16
The typical consumer in an imaginary economy consumes 5 books and 10 calculators. Using 2006 as the base
year, the consumer price index is
a.
100 in 2006, 135 in 2007, and 155 in 2008.
b.
100 in 2006, 270 in 2007, and 310 in 2008.
c.
200 in 2006, 270 in 2007, and 310 in 2008.
d.
200 in 2006, 540 in 2007, and 620 in 2008.
17
The typical consumer in an imaginary economy consumes 5 books and 10 calculators. Using 2007 as the base
year, the consumer price index is
a.
78.22 in 2006, 100 in 2007, and 121.10 in 2008.
b.
74.07 in 2006, 100 in 2007, and 114.81 in 2008.
c.
100 in 2006, 135 in 2007, and 155 in 2008.
d.
200 in 2006, 270 in 2007, and 310 in 2008.
18
The typical consumer in an imaginary economy consumes 5 books and 10 calculators. Using 2008 as the base
year, the consumer price index is
a.
52.66 in 2006, 84.25 in 2007, and 106.5 in 2008.
b.
64.52 in 2006, 87.10 in 2007, and 100 in 2008.
c.
52.66 in 2006, 90.89 in 2007, and 100 in 2008.
d.
100 in 2006, 135 in 2007, and 155 in 2008.
19
The typical consumer in an imaginary economy consumes 5 books and 10 calculators. Using 2006 as the base
year, the inflation rate is
a.
13.3 percent for 2007 and 14.8 percent for 2008.
b.
35 percent for 2007 and 14.8 percent for 2008.
c.
35 percent for 2007 and 55 percent for 2008.
d.
135 percent for 2007 and 155 percent for 2008.
20
Assume the consumer price index was 225 in 2006 and 234 in 2007. The nominal interest rate during this
period was 6.5 percent. What was the real interest rate during this period?
a.
2.5 percent
b.
4.0 percent
c.
7.5 percent
d.
10.5 percent
21
The legendary baseball player Babe Ruth's 1931 salary was $80,000. The consumer price index was 15.2 in
1931 and 195 in 2005. Ruth's 1931 salary was equivalent to a 2005 salary of about
a.
$536,000.
b.
$828,000.
c.
$1,026,000.
d.
$1,216,000.
22
a.
b.
c.
d.
The labor force
equals the number of people employed.
equals the number of people employed plus the number of people unemployed.
equals the adult population.
equals the number of people who are working.
23
Cem just lost his job, but isn't yet looking for a new job. Cem is
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a.
b.
c.
d.
counted as unemployed and part of the labor force.
counted as unemployed, but not part of the labor force.
not counted as unemployed, but counted as part of the labor force.
not counted as unemployed and not counted as part of the labor force.
24
Which of the following correctly ranks categories from smallest to largest according to recent employment
statistics as reported by the TUIK?
a.
unemployed, employed, not in labor force
b.
unemployed, not in labor force, employed
c.
not in labor force, employed, unemployed
d.
not in labor force, unemployed, employed
25
In 2004, based on concepts similar to those used to estimate U.S. employment figures, the Japanese adult noninstitutionalized population was 109.684 million, the labor force was 65.760 million, and the number of people
employed was 62.630 million. According to these numbers, the Japanese labor-force participation rate and
unemployment rate were about
a.
60%, 2.9%
b.
60%, 4.8%
c.
57.1%, 2.9%
d.
57.1%, 4.8%
26
Suppose that in the small country of Sociopolis there are 6 million people in the adult population, that the
labor-force participation rate is 70 percent, and that there are 3.8 million people employed. To the nearest tenth, what
is the unemployment rate?
a.
10.5%
b.
9.5%
c.
6.7%
d.
None of the above is correct.
27
Matt loses his job and decides to sit on the beach rather than looking for work the next six months. Other
things the same, the unemployment rate
a.
increases, and the labor-force participation rate is unaffected.
b.
increases, and the labor-force participation rate decreases.
c.
decreases, and the labor-force participation rate increases.
d.
decreases, and the labor-force participation rate decreases.
28
Some persons are counted as “not in the labor force” because they have made no serious effort to look for
work. However, some of these individuals may want to work even though they are too discouraged to make a serious
effort to look for work. If these individuals were counted as unemployed instead of out of the labor force,
a.
both the unemployment rate and labor-force participation rate would be higher.
b.
the unemployment rate would be higher and the labor-force participation rate would be lower.
c.
the unemployment rate would be lower and the labor-force participation rate would be higher.
d.
None of the above is correct.
29
a.
b.
c.
d.
In Turkey, in recent years the labor-force participation rate has been about
50 percent.
60 percent.
70 percent.
80 percent.
30
In some East Asian countries real GDP per person has grown at an average annual rate of 7%. This implies that
real GDP per person in those countries doubles about every
a.
10 years.
b.
15 years.
c.
20 years.
d.
25 years.
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a.
b.
c.
d.
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32
If one wants to know how the material well-being of the average person has changed over time in a given
country, one should look at the
a.
level of real GDP.
b.
growth rate of nominal GDP.
c.
growth rate of real GDP.
d.
growth rate of real GDP per person.
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33
a.
b.
c.
d.
The level of real GDP person
differs widely across countries, but the growth rate of real GDP per person is similar across countries.
is very similar across countries, but the growth rate of real GDP per person differs widely across countries.
and the growth rate of real GDP per person are similar across countries.
and the growth rate of real GDP per person vary widely across countries.
The average amount of goods and services produced from each hour of a worker’s time is called
per capita GDP
per capita GNP
productivity
human capital
34
In 2004 real GDP in Latania was 750 billion and the population was 3 million. In 2005 real GDP was 907.5 billion
and the population was 3.3 million. What was the approximate growth rate of real GDP per person?
a.
10 percent
b.
14 percent
c.
17 percent
d.
21 percent
35
Consider two countries. Country A has a population of 1,000, of whom 800 work 8 hours a day to make
128,000 final goods. Country B has a population of 2,000 of whom 1,800 work 6 hours a day to make 270,000 final
goods
a.
Country A has higher productivity and higher real GDP per person than country B.
b.
Country A has lower productivity and lower real GDP per person than country B.
c.
Country A has higher productivity, but lower real GDP per person than country B.
d.
Country B has lower productivity, but higher real GDP per person than country B.
36
a.
b.
c.
d.
Which of the following would be human capital and physical capital respectively?
for an accounting firm, the accountants knowledge of tax laws and computer software
for a grocery store, grocery carts and shelving
for a school, chalkboard and desks
for a library, the building and the reference librarians’ knowledge of the Internet
37
If in a closed economy Y = $11 trillion, which of the following combinations would be consistent with national
saving of $2.5 trillion?
a.
C = $8 trillion, G = $0.5 trillion
b.
C = $6.5 trillion, G = $3 trillion
c.
C = $8.5 trillion, G = $2 trillion
d.
C = $9 trillion, G = $.5 trillion
38
Suppose that in a closed economy GDP is $11 trillion, consumption is $7 trillion, taxes are $2 trillion and the
government runs a deficit of $1 trillion. What are private savings and national savings?
a.
$4 trillion and $1 trillion
b.
$4 trillion and -$1 trillion
c.
$2 trillion and $1 trillion
d.
$2 trillion and -$1 trillion
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39
Larry uses part of his monthly income to buy shares of the A-to-Z Express Company. XYZ Corporation builds a
new factory. Which transaction is an investment in the language of macroeconomics?
a.
only Larry’s
b.
only XYZ’s
c.
Larry’s and XYZ’s
d.
Neither Larry’s nor XYZ’s
40
Suppose the loanable funds market is in equilibrium. Use the following numbers to determine the quantity of
funds supplied in the loanable funds market. GDP = $8.7 trillion, C = $3.5 trillion, Taxes = $2.7 trillion, and G
(government purchases) = $3.0 trillion.
a.
$2.2 trillion
b.
$2.5 trillion
c.
$3.9 trillion
d.
$5.2 trillion
41
A closed economy had a smaller budget deficit in 2003 than in 2002. Other things the same, we expect this
reduction in the budget deficit to have
a.
raised interest rates and investment.
b.
raised interest rates and reduced investment.
c.
reduced interest rates and raised investment.
d.
reduced interest rates and investment.
42
exports?
a.
b.
c.
d.
Suppose that a country imports $100 million of goods and services and exports $75 million of goods and services, what is the value of net
43
a.
b.
c.
d.
Net capital outflow refers to the purchase of
foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.
$175 million
$75 million
$25 million
-$25 million
44
Suppose that more Chinese decide to vacation in the U.S. and that the Chinese purchase more U.S. Treasury bonds. Ignoring how
payments are made for these purchases,
a.
the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow.
b.
the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow.
c.
the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow.
d.
the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow.
45
a.
b.
c.
d.
John, a U.S. citizen, opens up a Sports bar in Tokyo. This counts as U.S.
exports.
imports.
foreign portfolio investment.
foreign direct investment.
46
a.
b.
c.
d.
Net capital outflow
is always greater than net exports.
is always less than net exports.
is always equal to net exports.
could be any of the above.
47
a.
b.
c.
d.
If there is a trade deficit, then
saving is greater than investment and Y > C + I + G.
saving is greater than investment and Y < C + I + G.
saving is less than investment and Y > C +I + G.
saving is less than investment and Y < C + I + G.
48
a.
A country has $100 million of net exports and $170 million of saving. Net capital outflow is
$70 million and domestic investment is $170 million.
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b.
c.
d.
$70 million and domestic investment is $270 million.
$100 million and domestic investment is $70 million.
None of the above is correct.
49
In an open economy, gross domestic product equals $2,450 billion, consumption expenditure equals $1,390 billion, government
expenditure equals $325 billion, investment equals $510 and net capital outflow equals $225 billion. What is national saving?
a.
$225 billion
b.
$510 billion
c.
$735 billion
d.
$1,390 billion
50
a.
b.
c.
d.
Over the past two decades, Turkey has
generally had, or been very near to a trade balance.
had trade deficits in about as many years as it has trade surpluses.
persistently had a trade deficit.
persistently had a trade surplus.