Download ECON212 MT Sample

Important: Please remember it is a sample exam. Number of questions in each section and
structure of questions in section b and c would vary as discussed in class
VANCOUVER ISLAND UNIVERSITY
ECON212: PRINCIPLES OF MACROECONOMICS, Spring 2013
SAMPLE MIDTERM EXAM
Name (Last, First): ______________________________________________
ID #:
______________________________________________
Signature: _______________________________________________
THIS EXAM HAS TOTAL 14 PAGES INCLUDING THE COVER PAGE
Instructions:

Total marks ____ and you have 75 Minutes to complete the exam.

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
Sample Midterm, ECON212 2
Spring 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) fluctuations and trends in aggregated data
b) individual households and how they deal with problems like inflation and unemployment
c) governments and their intervention in individual markets
d) large economic units such as General Motors or Molson Breweries
02. Potential or full-employment output is
a) a goal that can never be achieved by the economy
b) the GDP that would be produced if the economy's resources were fully employed at a
normal intensity of use
c) achieved during periods when all of the labour force is employed
d) the maximum GDP that an economy actually achieves throughout its entire history
e) the GDP that could be produced if the economy's resources were fully employed at their
maximum intensity of use
03. 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
04. Which if the following is the main result of long-term economic growth?
a) increasing inflation rate
b) decreasing interest rates
c) decreasing unemployment rate
d) a rising average living standards
e) appreciation of the domestic currency
05.In the study of short-run fluctuations in national income, potential income (output) is usually
assumed to be
a) irrelevant, as the economy is rarely there
b) falling at its average growth rate
c) moving together with potential output in neighbouring countries
d) equal to actual income
e) constant
Sample Midterm, ECON212 3
Spring 2013
06. 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) 5.5 percent
d) 3.0 percent
e) 14 percent
07. A nation's gross domestic product (GDP) in a given year measures the
a) opportunity cost of the economy's national output
b) market value of national output produced by the economy
c) level of national income that is subject to taxation by the federal government
d) value of output produced by the economy, measured in constant dollars
e) dollar income earned by the nation's producing sector
08. Which of the following transactions would not be included in the calculation of GDP on the
expenditure side?
a) The purchase of ground beef by McDonald’s
b) The purchase of an airplane by Air Canada
c) The purchase of a plumber’s services by a household
d) The purchase of a new condo by a household
09. If a country is experiencing inflation, the change in the nominal national product will
a) be falling faster than the rate of inflation
b) equal the change in the real national product
c) overstate the inflation rate
d) understate the value of national income
e) overstate the change in the real value of production
10. When calculating GDP using the expenditure approach, the investment component includes
a) fixed investment minus depreciation
b) net investment plus depreciation
c) gross investment plus depreciation
d) net investment only
e) net investment minus depreciation
11. In the simple macroeconomic model, "autonomous expenditures" are
a) not dependent on national income
b) induced expenditures
c) non-domestic expenditures
d) dependent on national income
e) those which are constant
Sample Midterm, ECON212 4
Spring 2013
12.Refer to the following table.
Dependent variable
0
50
150
300
Independent Variable
10
30
70
130
The slope is equal to
a) 0.4
b) 4.0
c) 0.6
d) 0.67
13. 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) BY measuring the standard of living by using real GDP per person we remove any influence
from rising prices
d) 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
14. 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) 675
c) 350
d) 525
15. When the unemployment rate is less than the natural unemployment rate, real GDP is ________
than potential GDP and the output gap is ___________
a) greater; negative
b) smaller; positive
c) smaller; negative
d) greater; positive
16. 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) frictional
c) structural
d) natural
17. The CPI in 2007 was 111.5 and in 2008 was 114.1. The inflation rate is
a) 2.3%
b) 2.6%
c) 112.8
d) Insufficient information
Sample Midterm, ECON212 5
Spring 2013
18. The economic growth rate is the annual percentage change of
a) real GDP
b) labour productivity
c) the quantity of money
d) real GDP per person
19. 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) real GDP; the population
b) the population; real GDP
c) GDP; the population
d) Inflation; real GDP
20. According to new growth theory, ________ experience diminishing returns
a) labour does not
b) knowledge is capital that does not
c) physical capital does not
d) factors of production
Sample Midterm, ECON212 6
Spring 2013
PART B: Short Answer Questions
a. (5 marks) Use the following table, Calculate Canada’s GDP in 2008.
Item
Billions of dollars
Wages paid to labour
815
Consumption expenditure
885
Net domestic income at factor cost
1,210
Investment
304
Government expenditure
357
Net exports
32
Depreciation
202
Using expenditure method, GDP equals consumption expenditure plus investment plus government
expenditure plus net exports, so GDP equals $885 billion + $304 billion + $357 billion $32 billion, or
$1,578 billion.
b. (5 marks) The table provides data on the economy of Maritime Republic that produces only fish and
crabs. Calculate Maritime Republic’s real GDP in 2012 assuming 2011 as the base year. What is the
GDP deflator in 2012
Quantities
Fish
Crabs
2011
2012
1,000 tonnes
1,100 tonnes
500 tonnes
525 tonnes
$20 a tonne
$30 a tonne
$10 a tonne
$8 a tonne
Prices
Fish
Crabs
Sample Midterm, ECON212 7
Spring 2013
c. In Nova Scotia in May 2011, the labour force was 501,700 and 458,100 people were employed. In
June 2011, the labour force increased by 4,600 and the number employed increased by 9,300.
Calculate the unemployment rate in May 2011 and in June 2011.
The May 2011, the unemployment rate was 8.7 percent and the June 2011, the unemployment rate
was 7.7 percent. In May 2011, unemployment was 501,700 minus 458,100, which equals 43,600. The
unemployment rate was (43,600/501,700) × 100, which is 8.7 percent. In June, the labour force was
4,600 more than in May, so the labour force was equal to 506,300. In June, the number of employed
workers was 458,100 plus 9,300, which equals 467,400. With employment in June of 467,400 and a
labour force of 506,300, the number of unemployed workers in June was 506,300 minus 467,400,
which equals 38,900. As a result, the unemployment rate in June 2011, was (38,500/506,300) × 100,
which is 7.7 percent.
d. If a severe drought decreases labour productivity, explain what happens to
i. Potential GDP
The production function shifts downward and equilibrium employment decreases, both of which
decrease potential GDP
ii. Employment
Employment Decreases. The demand for labour decreases, which decreases equilibrium
employment
iii. The real wage
The real wage falls. The demand for labour decreases, which lowers the equilibrium real wage
rate
Sample Midterm, ECON212 8
Spring 2013
e. (5 marks) The list below provides some national income figures for the country of Econoland. All
figures are in millions of dollars. Using the income approach, what is the value of GDP for Econoland?
Items
$$
GDP: Expenditure Method
Wages & Salaries
5000
5000
Interest income
200
200
Personal consumption
3900
Personal savings
1100
Personal income taxes
200
Business profits
465
465
Indirect taxes
175
175
Subsidies
30
-30
Govt purchases
1000
Exports
350
Imports
390
Net private investment
950
Depreciation
150
150
GDP
5960
Sample Midterm, ECON212 9
Spring 2013
PART C: Essay
Carefully discuss at least of types of economic growth theories, e.g., classical and new growth
theories. What type of theory you think more applicable and why?
*END OF EXAMINATION*
Sample Midterm, ECON212 10
Spring 2013
Name:
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Signature: _______________________________________________
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