Download midterm exam 1 - University of Guelph

University of Guelph
Open Learning Program
Bronte College of Canada
ECON*1100: Introductory Macroeconomics
Instructor: Vitali Alexeev
Winter 2010
MIDTERM EXAM 1
DO NOT OPEN YOUR EXAM UNTIL TOLD TO DO SO
WRITE YOUR NAME AND STUDENT ID NUMBER ABOVE AND ON YOUR COMPUTER
ANSWER SHEET.
YOU MAY USE SIMPLE CALCULATORS
PLEASE, IF YOU HAVE A CELL PHONE TURN IT OFF FOR THE DURATION OF THE EXAM
The exam will last 2 hours. Students may not leave during the first 1 hour of the exam.
Part I consists of 70 Multiple Choice questions worth 1 point each for a total of 70 points
Part II consists of 2 short answer questions worth 15 points each for a total of 30 points.
Important!
Record your multiple choice answer in the answer table at the back of the exam!
Page 1 of 14 Part 1 - Multiple Choice
____
1. If a province made an illegal activity such as gambling or prostitution legal, then other things the same GDP
a. necessarily increases.
b. necessarily decreases.
c. doesn't change because both legal and illegal production are included in GDP.
d. doesn't change because these activities are never included in GDP.
____
2. Which of the following is counted in GDP?
a. the estimated value of housework
b. the value of illegally produced goods and services
c. the value of newly issued stocks and bonds
d. None of the above are correct.
Table 5-2
GDP
Income Earned by Citizens Abroad
Income Foreigners Earn Here
Depreciation
Capital Consumption Allowance
Indirect Business Taxes
$440
$20
$50
$16
$16
$20
Business Subsidies
Statistical Discrepancy
Retained Earnings
Corporate Income Taxes
Social Insurance Contributions
Interest Paid to Households by Government
Transfer Payments to Households from Government
Personal Taxes
Non-tax Payments to Government
$8
$0
$25
$18
$35
$12
$22
$70
$5
____
3. Refer to Table 5-2. Disposable personal income for this economy is
a. $353
b. $343
c. $278
d. $273
e. $223
____
4. If the government reports that "GDP increased at an annual rate of 6.0 percent for the fourth quarter of 2002"
then GDP increased by
a. 6.0 percent during 2002.
b. 24.0 percent during 2002.
c. 6.0 percent during the fourth quarter.
d. 1.5 percent during the fourth quarter.
____
5. If Canadian GDP in the fourth quarter is $10 trillion dollars, then
a. this number reflects the actual amount of final goods and services produced in the fourth
quarter.
b. to find the amount actually produced in that quarter we would have to divide by four
because GDP is reported at annual rates.
c. the amount actually produced in the fourth quarter is somewhat higher because GDP is
seasonally adjusted and nonseasonally adjusted GDP for the fourth quarter is typical higher.
d. to find the amount actually produced in that quarter would require both dividing it by about
four and then adding back in what had been removed for seasonal adjustment.
e. None of the above is correct.
Page 2 of 14 ____
6. When a firm produces consumer goods and adds some to inventory rather than selling it. It is
a. not counted in the current quarter GDP.
b. counted in the current quarter GDP as investment.
c. counted in the current quarter GDP as consumption.
d. counted in the current quarter GDP as a statistical discrepancy.
____
7. If total spending rises from one year to the next, then
a. the economy must be producing a larger output of goods and services.
b. prices at which goods and services are sold must be higher.
c. either the economy must be producing a larger output of goods and services, or the prices at
which goods and services are sold must be higher, or both.
d. employment or productivity must be rising.
____
8. Which of the following statements about GDP is most accurate?
a. Nominal GDP values production at current prices, while real GDP values production at
constant prices.
b. Nominal GDP values production at constant prices, while real GDP values production at
current prices.
c. Nominal GDP values production at market prices, while real GDP values production at the
cost of the resources used in the production process.
d. Nominal GDP consistently underestimates the value of production, while real GDP
consistently overestimates the value of production.
____
9. Many things that society values, such as good health, high-quality education, enjoyable recreation
opportunities, and desirable moral attributes of the population, are not measured as part of GDP.
a. Therefore, GDP is not a useful measure of society's welfare.
b. However, GDP is still a useful measure of society's welfare because providing these other
attributes is the responsibility of government.
c. However, GDP is still a useful measure of society's welfare because it measures a nation's
ability to purchase the inputs that can be used to help produce the things that contribute to
welfare.
d. However, GDP is still the best measure of society's welfare because these other values
cannot actually be measured.
____ 10. International studies of the relationship between GDP per person and quality of life measures such as life
expectancy and literacy rates show that larger GDP per person is associated with
a. longer life expectancy and a lower percentage of the population that is literate.
b. longer life expectancy and a higher percentage of the population that is literate.
c. very nearly the same life expectancy and a lower percentage of the population that is literate.
d. very nearly the same life expectancy and a higher percentage of the population that is
literate.
____ 11. The CPI is a measure of the overall cost of
a. inputs purchased by a typical producer.
b. goods and services bought by a typical consumer.
c. goods and services produced in the economy.
d. stocks on the New York Stock Exchange.
Page 3 of 14 Use the table below to answer the following questions.
Table 24-1
year
2005
2006
peaches
$14 per bushel
$12 per bushel
pecans
$9 per bushel
$14 per bushel
____ 12. Refer to Table 24-1. Suppose that the typical consumer basket consists of 5 bushels of peaches and 10 bushels
of pecans and that the base year is 2000. What is the consumer price index for 2006?
a. 80
b. 100
c. 125
d. 200
e. None of the above
____ 13. Refer to Table 24-1. What was the inflation rate in 2006?
a. 25 percent
b. 20 percent
c. 5 percent
d. 4 percent
e. There is insufficient information to answer this question.
____ 14. If the consumer price index was 100 in the base year and 107 the following year, the inflation rate was
a. 107 percent.
b. 10.7 percent.
c. 7 percent.
d. None of the above are correct.
____ 15. The price index is 320 in one year and 360 in the next. What was the inflation rate?
a. 6.7 percent
b. 8 percent
c. 11.1 percent
d. 12.5 percent
For the following questions, consider the table below.
Table 24-4
Food and Beverages
Housing
Transportation
2006
168.4
169.6
153.3
2007
173.6
176.2
154.3
____ 16. Refer to Table 24-4. Of those categories, which one had the highest increase and which one had the lowest rate
of inflation?
a. Food and Beverages, Housing
b. Food and Beverages, Transportation
c. Housing, Food and Beverages
d. Housing, Transportation
Page 4 of 14 Table 24-5
The table below pertains to an economy with only two goods -- books and calculators. The fixed basket consists
of 5 book and 10 calculators.
Year
2005
2006
2007
Price of Books
$24
$30
$12
Price of Calculators
$8
$12
$15
____ 17. Refer to Table 24-5. Using 2006 as the base year, the consumer price index is
a. 78.22 in 2005, 100 in 2006, and 121.10 in 2007
b. 74.07 in 2005, 100 in 2006, and 114.81 in 2007
c. 100 in 2005, 135 in 2006, and 155 in 2007
d. 200 in 2005, 270 in 2006, and 310 in 2007
e. None of the above is correct.
____ 18. Refer to Table 24-5. Using 2007 as the base year, the consumer price index is
a. 52.66 in 2005, 84.25 in 2006, and 106.5 in 2007
b. 64.52 in 2005, 87.10 in 2006, and 100 in 2007
c. 52.66 in 2005, 90.89 in 2006, and 100 in 2007
d. 100 in 2005, 135 in 2006, and 155 in 2007
e. None of the above are correct.
____ 19. If the cost of transportation and the cost of food both increase by 30 percent, other things the same, the CPI is
likely to increase by about
a. 3 percent.
b. 6 percent.
c. 9 percent.
d. 11 percent.
e. 13 percent
____ 20. Which of the following is not a widely acknowledged problem with the CPI as a measure of the cost of living?
a. substitution bias
b. introduction of new goods
c. unmeasured quality change
d. unmeasured price change
____ 21. Which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant
to?
a. substitution bias
b. introduction of new goods
c. unmeasured quality change
d. income bias
____ 22. Most studies in the 1990s concluded that the consumer price index overstated inflation by about
a. 3 percentage points.
b. 2 percentage points.
c. 1 percentage point.
d. 1/2 of a percentage point.
____ 23. An important difference between the GDP deflator and the consumer price index is that
a. the GDP deflator reflects the prices of goods and services bought by producers, whereas the
consumer price index reflects the prices of goods and services bought by consumers.
b. the GDP deflator reflects the prices of all final goods and services produced domestically,
whereas the consumer price index reflects the prices of some goods and services bought by
consumers.
c. the GDP deflator reflects the prices of all final goods and services produced by a nation's
Page 5 of 14 citizens, whereas the consumer price index reflects the prices of final goods and services
bought by consumers.
d. the GDP deflator reflects the prices of all goods and services bought by producers and
consumers, whereas the consumer price index reflects the prices of final goods and services
bought by consumers.
____ 24. A German automobile company produces cars in Canada, some of which are exported to other nations. If the
price of these cars increases, the GDP deflator
a. and the CPI will both increase.
b. will increase and the CPI will be unchanged.
c. will be unchanged and the CPI will increase.
d. and the CPI will both be unchanged.
____ 25. You know that a candy bar cost five cents in 1962. You also know the CPI for 1962 and the CPI for today.
Which of the following would you use to compute the price of the candy bar in today's prices?
a. five cents  (1962 CPI/ today's CPI)
b. five cents  (1962 CPI/(today's CPI - 1962 CPI))
c. five cents  (today's CPI/1962 CPI)
d. five cents  today's CPI - five cents  1962 CPI.
____ 26. The 2002 CPI was 177 and the 1982 CPI was 96.5. If your parents put aside $1,000 for you in 1982, how much
would you have needed in 2002 in order to buy what you could have with the $1,000 in 1982?
a. $1,834.20
b. $1,777.77
c. $1,714.81
d. None of the above are correct.
____ 27. Leslie is offered a job in Vancouver that pays $50,000. She is also offered a job in Halifax that pays $60,000.
Which set of CPI's below would make the two salaries have almost the same purchasing power?
a. 83.3 in Vancouver and 100 in Halifax
b. 89.3 in Vancouver and 100 in Halifax
c. 100 in Vancouver and 124.5 in Halifax
d. 100 in Vancouver and 140 in Halifax
____ 28. Tiffany is offered a job in Winnipeg that pays $90,000. She is offered a similar job in Montreal for $60,000.
Which set of CPI's would make the two salaries have almost the same purchasing power?
a. 90 in Winnipeg and 80 in Montreal
b. 90 in Winnipeg and 72 in Montreal
c. 90 in Winnipeg and 66 in Montreal
d. 60 in Winnipeg and 40 in Montreal
e. None of the above is correct
____ 29. When box office receipts are corrected for inflation, the No. 1 movie of all time is
a. Star Wars: The Phantom Menace
b. Spiderman
c. Gone With the Wind
d. The Sound of Music
____ 30. In the early 2000s
a. real interest rates were high and nominal interest rates were low
b. real interest rates were low and nominal interest rate were high
c. both real interest rates and nominal interest rates were high
d. both real interest rates and nominal interest rates were low
Page 6 of 14 ____ 31. 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
a. the level of real GDP.
b. the growth rate of nominal GDP.
c. the growth rate of real GDP.
d. the growth rate of real GDP per person.
e. the growth rate of nominal GDP per person.
____ 32. Income per person in Canada is about
a. 2 times that in China and 6 times that in India.
b. 4 times that in China and 8 times that in India.
c. 6 times that in China and 10 times that in India.
d. 10 times that in China and 6 times that in India.
e. 8 times that in China and 4 times that in India.
____ 33. Laurie works eight hours and produces 7 units of goods per hour. Iris works six hours and produces 10 units of
goods per hour.
a. Laurie’s productivity and output are greater that Iris’.
b. Laurie’s productivity is greater than Iris’ but his output is less.
c. Iris’ productivity and output are greater than Laurie’s.
d. Iris’ productivity is greater that Laurie’s but her output is less.
____ 34. Dawn looks over reports on five of her workers. Carol made 25 baskets in 5 hours. Peter made 36 baskets in 6
hours. Rob made 40 baskets in 10 hours. Jack made 55 baskets in 10 hours. Darby made 22 baskets in 3 hours.
Who has the greatest productivity?
a. Carol
b. Peter
c. Rob
d. Jack
e. Darby
____ 35. Which of the following is a determinant of productivity?
a. human capital
b. physical capital
c. natural resources
d. technological knowledge
e. All of the above are correct.
____ 36. Which of the following would not be considered physical capital?
a. a new factory building
b. a computer used to help Mercury Delivery Service keep track of their orders
c. on-the-job training
d. a desk used in an accountant's office
____ 37. Natural resources
a. are inputs provided by nature.
b. are inputs such as land, rivers, and mineral deposits.
c. take two forms: renewable and nonrenewable.
d. All of the above are correct.
Page 7 of 14 ____ 38. Greater scarcity of a natural resource is indicated
a. simply by an increase in its price.
b. by an increase in its price that is greater than the rate of inflation, but only if the increase in
price is created by a reduction in supply.
c. by an in increase in its price that is greater than the rate of inflation.
d. by an increase in its price that is greater than the rate of inflation, but only if the stock of the
resource has fallen.
e. All of the above are correct.
____ 39. Suppose that over the last ten years productivity grew faster in Oceania than in Freedonia and the population of
both countries was unchanged.
a. It follows that real GDP per person must be higher in Oceania than in Freedonia.
b. It follows that real GDP per person grew faster in Oceania than in Freedonia.
c. It follows that the standard of living must be higher in Oceania than in Freedonia.
d. All of the above are correct.
____ 40. Suppose that real GDP grew more in Country A than in Country B last year.
a. Country A must have a higher standard of living than country B.
b. Country A's productivity must have grown faster than country B's.
c. Both of the above are correct.
d. None of the above are correct.
____ 41. Suppose that there are diminishing returns to capital. Suppose also that two countries are the same except one
has less capital and so less real GDP per person. Suppose that both increase their saving rate from 3 percent to 4
percent. In the long run
a. Both countries will have permanently higher growth rates of real GDP per person, and the
growth rate will be higher in the country with more capital.
b. Both countries will have permanently higher growth rates of real GDP per person, and the
growth rate will be higher in the country with less capital.
c. Both countries will have higher levels of real GDP per person, and the temporary increase in
growth in the level of real GDP per person will have been greater in the country with more
capital.
d. Both countries will have higher levels of real GDP per person, and the temporary increase in
growth in the level of real GDP per person will have been greater in the country with less
capital.
____ 42. Other things the same, if a country increased its saving rate, in 40 years they would likely have
a. higher productivity, and a higher growth rate of real GDP.
b. higher productivity, but not a higher growth rate of real GDP.
c. the same productivity and growth of real GDP they began with.
d. None of the above are correct.
____ 43. The catch-up effect refers to the idea that
a. saving will always "catch-up" with investment spending.
b. it is easier for a country to grow fast if it starts out relatively poor.
c. rich countries aid relatively poor countries so as to help them "catch up."
d. if investment spending is low, increased saving will help investment to "catch-up."
____ 44. Investment from abroad
a. is a way for poor countries to learn the state-of-the-art technologies developed and used in
richer countries.
b. is viewed by economists as a way to increase growth.
c. often requires removing restrictions that governments have imposed on foreign ownership
of domestic capital.
d. All of the above are correct.
Page 8 of 14 ____ 45. Inward-oriented policies
a. include imposing tariffs and other trade restrictions.
b. have generally increased productivity and growth in the countries that pursued them.
c. promote production of goods and services the country that adopts them can produce most
efficiently.
d. All of the above are correct.
____ 46. The president of a poor country has announced that he will implement the following measures which he claims
are designed to increase growth: 1. Reduce corruption in the legal system; 2. Reduce reliance on market forces
because they allocate goods and services in an unfair manner; 3. Restrict investment in domestic industries by
foreigners because they take some of the profits out of the country; 4. Encourage trade with neighboring
countries; and 5. Increase the fraction of GDP devoted to consumption. How many of these measures will have
a positive effect on growth?
a. 1
b. 2
c. 3
d. 4
____ 47. National defense and knowledge are considered
a. private goods.
b. public goods.
c. normal goods.
d. societal goods.
____ 48. There is some controversy concerning what the source of the Canadian productivity slowdown was. However, it
appears that it was caused mostly by
a. a decrease in the growth of human capital per person.
b. capital wearing out so that capital per person fell.
c. changes in technological progress.
d. the continued depletion of natural resources.
e. both b and c are correct.
____ 49. Which of the following is NOT correct?
a. China allows only one child per family and couples that violate this rule are subject to
substantial fines.
b. In developed countries, population growth is 3 percent; in many developing countries it is 5
percent.
c. Educational attainment tends to be lowest in countries with the highest population growth.
d. Economists generally believe that a country that decreases a high population growth rate
can increase its economic growth rate.
____ 50. Economists differ in their views of the role of the government in promoting economic growth. According to the
text, at the very least, the government should
a. lend support to the invisible hand by maintaining property rights and political stability.
b. limit foreign investment to industries that don't already exist.
c. impose trade restrictions to protect the interests of domestic producers and consumers.
d. subsidize key industries.
____ 51. When a country saves a larger portion of its GDP, it will have
a. less investment, and so have more capital and higher productivity.
b. less investment, and so have less capital and higher productivity.
c. more investment, and so have more capital and higher productivity.
d. more investment, and so have less capital and higher productivity.
Page 9 of 14 ____ 52. Institutions in the economy that help to match one person's saving with another person's investment are
collectively called the
a. the Bank of Canada
b. banking system.
c. monetary system.
d. financial system.
____ 53. A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a
a. bond.
b. stock.
c. mutual fund.
d. All of the above are correct.
____ 54. Which of the following is NOT a nonsensical headline?
a. British perpetuities about to mature.
b. Disney issues new bonds with term of $1,000 each.
c. Government bonds currently pay less interest than corporate bonds.
d. Standard and Poor's judges new junk bond to have very low credit risk.
____ 55. Long-term bonds are generally
a. less risky than short-term bonds and so pay higher interest.
b. less risky than short-term bonds and so pay lower interest.
c. more risky than short-term bonds and so pay higher interest.
d. more risky than short-term bonds and so pay lower interest.
____ 56. Compared to long-term bonds, other things the same, short-term bonds generally have
a. more risk and so pay higher interest.
b. less risk and so pay lower interest.
c. less risk and so pay higher interest.
d. about the same risk and so pay about the same interest.
____ 57. The price of stock traded on exchanges are determined by
a. the Corporate Stock Administration.
b. NASDAQ.
c. the supply and demand for the stock.
d. the Montreal Stock Exchange.
e. All of the above are correct.
____ 58. PacknCamp Corporation has a price of $50, has issued 2,000,000 shares of stock, has retained earnings of $2
million dollars, and a dividend yield of 2 percent. The price-earnings ratio of PacknCamp is
a. 50, which is high compared to historical standards of the market.
b. 50, which is low compared to historical standards of the market.
c. 25, which is low compared to historical standards of the market.
d. 25, which is high compared to historical standards of the market.
Page 10 of 14 Table 26-2
Stock
Boeing and Co.
Eli Lily and Co.
H.J. Heinz and Co.
Kellog Co.
Sym
BA
LLY
HNZ
K
Yld%
1.55
2.60
3.30
2.22
PE
30.48
29.71
15.33
20.50
Vol 100s
4,531,600
3,765,700
1,350,200
1,990,600
Hi
64.78
58.98
36.55
45.72
Lo
63.70
58.21
36.26
45.20
Close
64.62
58.52
36.33
45.50
Net Chg
+.93
+.16
+.21
+.24
____ 59. Refer to Table 26-2. Which company had the highest dollar dividend?
a. Boeing Co.
b. Eli Lily and Co.
c. H.J. Heinz and Co.
d. Kellog CO.
e. Both Boeing and Heinz had the same dollar dividend
____ 60. Which of the following is correct?
a. A large, well-known corporation like Proctor and Gamble typically uses financial
intermediation to finance expansion of its factories.
b. On average, indexed funds outperform managed funds.
c. Unlike corporate bonds and stocks, checking accounts are a store of value.
d. Financial intermediaries are institutions through which savers can directly provide funds to
borrowers.
____ 61. As a money management fee, mutual funds usually charge their customers
a. between 0.5 and 3.0 percent of assets each year.
b. between 1.5 and 3.0 percent of assets each year.
c. nothing, because they receive commissions from the firms whose stock they buy.
d. a flat fee of about $50.
e. None of the above are correct.
____ 62. In a closed economy, what does (T - G) represent?
a. national saving
b. investment
c. private saving
d. public saving
e. None of the above are correct.
____ 63. A budget surplus is created if
a. the government sells more bonds than it buys back.
b. the government spends more than it receives in tax revenue.
c. private savings are greater than zero.
d. None of the above are correct.
____ 64. Which of the following would a macroeconomist consider as investment?
a. Ernest purchases a bond issued by Star-Kist.
b. Jerry purchases stock issued by IBM.
c. Alice builds a new restaurant.
d. All of the above are correct.
____ 65. Henry buys a bond issued by Ralston Purina, which uses the funds to buy new machinery for one of its factories.
a. Henry and Ralston Purina are both investing.
b. Henry and Ralston Purina are both saving.
c. Henry is investing; Ralston Purina is saving.
d. Henry is saving; Ralston Purina is investing.
Page 11 of 14 ____ 66. If the inflation rate is 3 percent and the real interest rate is 5 percent, then the nominal interest rate is
a. 2 percent.
b. 3 percent.
c. 5 percent
d. 8 percent.
e. 15 percent
____ 67. The nominal interest rate is 8 percent and the real interest rate is 2 percent, what is the inflation rate?
a. 16 percent
b. 10 percent
c. 6 percent
d. 4 percent
e. 3 percent
____ 68. Suppose Parliament institutes an investment tax credit. What would happen in the market for loanable funds?
a. The interest rate and investment would fall.
b. The interest rate and investment would rise.
c. The interest rate would rise and investment would fall.
d. None of the above is necessarily correct.
____ 69. If the government currently has a budget deficit,
a. it does not necessarily have a debt.
b. the debt is increasing.
c. government expenditures are greater than taxes.
d. All of the above are correct.
____ 70. An increase in the budget deficit
a. makes investment spending fall.
b. makes investment spending rise.
c. does not affect investment spending.
d. may increase, decrease, or not affect investment spending.
Page 12 of 14 ECON*1100: Introductory Macroeconomics
Instructor: Vitali Alexeev
Winter 2010
MIDTERM EXAM 1
NAME: ___________________________
STUDENT ID: _______________
SIGNATURE: _____________________________
Multiple Choice Answers 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
Page 13 of 14 Part 2 - Short Answer
71. In addition to investment in physical and human capital, what other public policies might a country adopt to
increase productivity?
72. Identify each of the following acts as representing either saving or investment.
a. Fred uses some of his income to buy government bonds.
b. Julie takes some of her income and buys mutual funds.
c. Alex purchases a new truck for his delivery business using borrowed funds.
d. Elaine uses some of her income to buy stock in a major corporation,
e. Henrietta hires a builder to construct a new home using borrowed funds.
Page 14 of 14 Midterm 1
Answer Section
MULTIPLE CHOICE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
A
D
D
D
D
B
C
A
C
B
B
C
A
C
D
D
B
B
D
D
B
D
B
A
C
A
A
D
C
D
D
C
C
E
E
C
D
C
B
D
D
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
Easy
Average
Challenging
Easy
Average
Easy
Easy
Easy
Average
Average
Easy
Average
Average
Easy
Average
Average
Average
Average
Challenging
Easy
Easy
Easy
Challenging
Easy
Easy
Easy
Average
Average
Easy
Easy
Easy
Easy
Average
Easy
Easy
Easy
Easy
Average
Average
Challenging
Challenging
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
100-101
100-101
102
103
103
104
106
106-107
113-114
114-115
122
123-124
123-124
124
124
124
123-124
123-124
124
125-126
125-126
126
126-128
126-128
128
128
128
128
129
131
140-141
140
143
143
144-145
144
144-145
146
143
143
147-149
Page 15 of 14 42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
B
B
D
A
B
B
C
B
A
C
D
A
C
C
B
C
D
B
B
A
D
D
C
D
D
C
B
D
A
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
DIF:
Average
Easy
Easy
Easy
Challenging
Easy
Average
Easy
Easy
Easy
Easy
Easy
Average
Easy
Easy
Easy
Challenging
Average
Easy
Easy
Easy
Easy
Easy
Average
Easy
Easy
Average
Average
Easy
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
REF:
147-149
148
149-150
154
153-156
154
156-157
158
160
164
164
164
165
165
165
166
167
167
168
168
171-172
172
172
172-173
174
174
177-178
178-180
178-180
SHORT ANSWER
71. ANS:
In addition to investment in physical and human capital, a country might increase productivity by (a) specifying
and enforcing property rights, (b) encouraging free trade, (c) controlling population growth, and (d) promoting
research and development.
PTS: 1
DIF: Average
72. ANS:
a. Fred is saving.
b. Julie is saving.
c. Alex is investing.
d. Elaine is saving.
e. Henrietta is investing.
PTS: 1
DIF: Easy
REF: 153-158
REF: 172
Page 16 of 14