Download February 04, 2013

VANCOUVER ISLAND UNIVERSITY
ECON212: PRINCIPLES OF MACROECONOMICS, Spring 2013
MIDTERM EXAM I, February 04, 2013
THIS EXAM HAS TOTAL 08 PAGES INCLUDING THE COVER PAGE
Instructions:

Total marks: 90. Duration: 75 Minutes.

Please answer your MCQs in the table provided on the last page and short questions in the
space provided.

For short answer and easy type questions
 YOU MUST SHOW YOUR ALL WORK TO GET FULL MARKS. IF YOU DO NOT SHOW WORK,
YOU MAY NOT GET FULL MARKS EVEN FOR A CORRECT ANSWER.
 Use the marks assigned to each question as a guide to allocating your time across
questions.
Good Luck on Your Exam
Midterm Exam I, ECON212 2
February 04, 2013
PART A: MCQ
(There will be 30 MCQs in this section which is worth 30 marks)
01. Macroeconomics is mainly concerned with the study of
a)
b)
c)
d)
fluctuations and trends in aggregated data
individual households and how they deal with problems like inflation and unemployment
governments and their intervention in individual markets
large economic units such as General Motors or Molson Breweries
02. Suppose a Canadian firm imports $5 000 worth of frisbees from China and sells them for $10 000. The
effect on GDP would be
a) to increase the value of GDP by $10 000
b) to increase the value of GDP by $5 000
c) to decrease the value of GDP by $15 000
d) no effect on GDP since the frisbees were produced outside of Canada
03. Which of the following statements about depreciation is true?
a)
b)
c)
d)
Net investment is equal to gross investment plus depreciation
Depreciation is equal to net investment
Net investment is equal to gross investment minus depreciation
Depreciation includes net additions to the economy's total stock of capital
04. Which of the following pairs are conceptually identical?
a)
b)
c)
d)
Personal income and personal disposable income
Gross domestic product and personal disposable income
Gross national product and gross domestic product
Gross domestic product and gross domestic expenditure
05. Real GDP is equivalent to
a)
b)
c)
d)
the money value of all goods and services produced in an economy per year plus imports
the market value of all goods and services produced in an economy per year
personal disposable income plus depreciation
the value of all goods and services produced in an economy per year adjusted for price changes
06. The three main reasons that Canada's real GDP has increased steadily for many years are
a) increasing productivity of labour, increasing productivity of land and increasing productivity of the
capital stock
b) an increasing stock of physical capital, increasing exports and rising employment
c) rising employment, increasing stock of physical capital and increasing productivity
d) rising employment, increasing levels of education of the labour force and the increase in the
participation rate of women in the labour force.
07. Real national income
a)
b)
c)
d)
always equals nominal national income
changes only when the underlying quantities change
changes by the same amount and in the same direction as does nominal national income
refers to national wealth but is not an indicator of current production
Midterm Exam I, ECON212 3
February 04, 2013
08. Suppose that a country's population is 30 million and it has a labour force of 15 million people. Assuming
it has 500 000 people unemployed, the country's unemployment rate is
a) 3.3 percent
b) 9.0 percent
c) 2.5 percent
d) 4.5 percent
09. Workers with marketable skills sometimes quit a job and become unemployed, with the expectation of
soon finding a better job. This type of unemployment is called
a) frictional unemployment
b) overly-optimistic unemployment
c) cyclical unemployment
d) historical unemployment
e) structural unemployment
10. If nominal national income increased by 20 percent over a certain period of time while real national
income increased by 10 percent, then
a) inflation has decreased during this time period
b) the price level has increased by approximately 10 percent
c) the labour force increased by 10 percent
d) everybody in the economy became worse off
e) the price level has declined by about 10 percent
11. If the Consumer Price Index changes from 120 in year one to 150 in year two, the rate of inflation in the
intervening year is
a) 12.5 percent
b) 10 percent
c) 25 percent
d) 30 percent
12. Which if the following is the main result of long-term economic growth?
a)
b)
c)
d)
e)
increasing inflation rate
decreasing interest rates
decreasing unemployment rate
a rising average living standards
appreciation of the domestic currency
13. Potential or full-employment output is
a)
b)
c)
d)
a goal that can never be achieved by the economy
achieved during periods when all of the labour force is employed
the maximum GDP that an economy actually achieves throughout its entire history
the GDP that could be produced if the economy's resources were fully employed at their maximum
intensity of use
e) the GDP that would be produced if the economy's resources were fully employed at a normal
intensity of use
14. Suppose that in 2007 Canada's automobile manufacturers produced 2 million cars priced at $20 000
each. And in 2008 they produced 1 million cars priced at $40 000 each. Ceteris paribus, the change in
nominal national income is
a) insufficient information to know
b) a decrease because fewer cars were produced
c) no change in nominal national income
d) an increase because the price of each car increased
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15. If the price index is
in one year and
in the next year, the inflation rate from one year to the next is
calculated as
a)
b)
c)
d)
16.In the study of short-run fluctuations in national income, potential income (output) is usually assumed to be
a)
b)
c)
d)
e)
irrelevant, as the economy is rarely there
falling at its average growth rate
constant
moving together with potential output in neighbouring countries
equal to actual income
17. Suppose the unemployment rate is 8.5 percent and we know that frictional and structural unemployment
together account for 5.5 percent. The cyclical unemployment rate is then
a) -3.0 percent
b) 8.5 percent
c) 3.0 percent
d) 14 percent
e) 5.5 percent
18. In Neoclassical growth theory, the production function exhibits
a)
b)
c)
d)
increasing returns to scale property
constant returns to scale property
diminishing returns to scale property
unknown returns to scale property
19. If a country is experiencing inflation, the change in the nominal national product will
a)
b)
c)
d)
e)
be falling faster than the rate of inflation
equal the change in the real national product
overstate the change in the real value of production
overstate the inflation rate
understate the value of national income
20. When calculating GDP using the expenditure approach, the investment component includes
a) fixed investment minus depreciation
b) gross investment plus depreciation
c) net investment plus depreciation
d) net investment only
e) net investment minus depreciation
21. In the simple macroeconomic model, "autonomous expenditures" are
a)
b)
c)
d)
e)
not dependent on national income
induced expenditures
non-domestic expenditures
dependent on national income
those which are constant
Midterm Exam I, ECON212 5
February 04, 2013
22.Refer to the following table.
Dependent Variable
10
30
70
130
Independent variable
0
50
150
300
The slope is equal to
a) 2.5
b) 0.4
c) 0.6
d) 0.67
23. Which of the statement is incorrect
a) Real GDP per person in Canada doubled between 1969 and 2010
b) Real GDP per person is real GDP divided by the population
c) Real GDP per person tells us the value of real GDP when all the economy’s labour, capital, land and
entrepreneurial ability are fully employed
d) BY measuring the standard of living by using real GDP per person we remove any influence from rising
prices
24. A south sea island produces only coconuts. In 2005, the price of coconut is $1.5 and quantity produced is
350. In 2010, the price of coconut is $1.0 and quantity produced is 450. Assuming 2005 as the base year,
real GDP in 2010 in terms of base-year price is
a) 450
b) 350
c) 525
d) 675
25. When the unemployment rate is less than the natural unemployment rate, real GDP is ________ than
potential GDP and the output gap is ___________
a) unchanged; unchanged
b) smaller; positive
c) smaller; negative
d) greater; positive
e) greater; negative
26. The unemployment that rises when changes in technology or international competition change the skills
needed to perform jobs or change the location of jobs is __________ unemployment
a) cyclical
b) structural
c) frictional
d) natural
27. The CPI in 2007 was 111.5 and in 2008 was 114.1. The inflation rate is
a)
b)
c)
d)
2.6%
2.3%
112.8
Insufficient information
Midterm Exam I, ECON212 6
February 04, 2013
28. The economic growth rate is the annual percentage change of
a)
b)
c)
d)
labour productivity
real GDP
the quantity of money
real GDP per person
29. Between 1910 and 2010, the average growth rate if real GDP per person in Canada was 2% a year. During
this period _______ grew at a faster rate than ________
a) the population; real GDP
b) real GDP; the population
c) GDP; the population
d) Inflation; real GDP
30. According to new growth theory, ________ experience diminishing returns
a)
b)
c)
d)
labour does not
knowledge is capital that does not
physical capital does not
factors of production
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PART B: SAQ
(This section contains 4 short answer questions, worth 40 marks)
1.
(10 marks) Using expenditure method, calculate the GDP for the following hypothetical economy
for the year 2020.
Item
Billions of dollars
Wages paid to labour
815
Consumption expenditure
885
Net domestic income at factor cost
1,210
Net Investment
304
Government expenditure
357
Exports
40
Subsidies
20
Import
50
Depreciation
202
GDP Expenditure method:
1738
here
Billion Dollars
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2.
(10 marks) A typical family on Sandy Island consumes only juice and cloth. Last year, which was
the base year, the family spent $40 on juice and $25 on cloth. In the base year, juice was $4 a
bottle and cloth was $5 a length. This year, juice is $4 a bottle and cloth is $6 a length. Calculate
the inflation rate in the current year
The consumer basket contains 10 Juice (
Cost of the basket in the base year (last year)
Cost of the basket in this year
= $40+$25=$65
Inflation rate=
3. (10 marks) Japan’s real GDP was 561 trillion yen in 2007 and 569 trillion yen in 2008. Japan’s
population was 127.7 million in 2007 and 127.8 million in 2008. Calculate the growth rate of real
GDP per person.
Per capita GDP in 2007
Per capita GDP in 2008
Per capita GDP growth rate in 2008
4. (10 marks) Statistics Canada reported the following data for June 2011:
Labour force: 19,021,600
Employment: 17,693,300
Working-age population: 27,975,700
Calculate the unemployment rate and labour force participation rate
Unemployment rate=
Labour force participation rate=
Midterm Exam I, ECON212 9
February 04, 2013
PART C: Essay Question
(In this section there is an Essay type question, worth 20 marks)
Toyota first to Build Electric Vehicles in Canada
“Toyota will start assembling electric versions of its RAV4 sport utility vehicle in Woodstock.
Governments are contributing $141 million to Toyota for a series of upgrades at plants in Cambridge and
Woodstock worth a total of $545 million under the name Project Green Light.”
Explain how this activity by Toyota will influence Canada’s GDP and the components of aggregate
expenditure
Keywords: investment, government expenditure, employment, GDP, GDP growth
*END OF EXAMINATION*
Midterm Exam I, ECON212 10
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Name (Last, First): ______________________________________________
ID #:
______________________________________________
Signature: _______________________________________________
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