Download Sample Midterm 2

Econ 200
Midterm 2
Spring 2011
May 11, 2011
Instructions :
1-) The exam is 60 minutes
2-) You have to provide detailed solution to each problem
3-) Any form of cheating (Peeking to other’s exam, use your cell phone or calculator, talking
for any reason, exchange eraser ) is strictly prohibited. It will result in an F grade AND
disciplinary action.
4-) You can only have your pen, pencil and eraser with you. Put everything else to a place
that you cannot reach.
5-) You cannot leave the classroom for any reason during the exam.
Good Luck.
Multiple Choice questions
Problem 1
Problem 2
Problem 3
Problem 4
Name:
Section:
/60
/10
/10
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Part I: Multiple Choice Questions
Explanation: Each question in this section is worth 4 points if your answer is correct, 0 point
if it is wrong, and 1 point if you unambigously leave it blank.
1)
The labor force equals the
number of people who are employed.
a.
b.
number of people employed plus the number of people unemployed.
c.
number of people who are unemployed.
d.
adult population.
Which of the following would be counted as unemployed according to official
2)
statistics?
a.
George, a full-time student who is not looking for work
b.
Larry, who has retired (emekli) and is not looking for work
c.
All of the above would be counted as unemployed.
d.
Mary, who is waiting for her new job to start
3)
Sam just lost his job, but isn't yet looking for a new one. Sam is
a.
counted as unemployed and part of the labor force.
counted as unemployed, but not part of the labor force.
b.
c.
not counted as unemployed, but counted as part of the labor force.
d.
not counted as unemployed or counted as part of the labor force.
4)
For the economy as a whole
a.
expenditure exceeds (is greater than) income because of taxes.
b.
income must equal expenditure.
c.
income exceeds expenditure because of saving.
d.
expenditure exceeds income because of the government budget deficit.
5)
6)
Gross Domestic Product is defined as the market value of
a.
all final goods and services produced by a country’s citizens in a given period of
time.
b.
every good and service produced within a country in a given period of time.
c.
all final goods and services produced within a country in a given period of
time.
d.
all goods and services produced by a country’s citizens in a given period of
time.
An American company has a fast-food store in İstanbul. The value of the goods and
services produced in the store are included
a.
in both Turkish GDP and U.S. GDP.
in U.S. GDP, but not Turkish GDP.
b.
c.
partly in Turkish GDP and partly in U.S. GDP.
d.
in Turkish GDP, but not U.S. GDP.
7)
The four components of GDP are consumption,
a.
money supply, government purchases, and exports.
b.
investment, transfer payments, and imports.
investment, government purchases, and net exports.
c.
d.
investment, government purchases, and foreign exchange.
8)
Productivity is the
a.
growth rate of real GDP.
b.
average amount a worker produces per hour.
c.
level of real GDP.
d.
None of the above is correct.
9)
The productivity of U.S. workers is higher than that of workers in many countries that
have less capital. Which of the following arguments concerning these facts is logically
consistent?
a.
If U.S. workers have more capital, they should have lower productivity.
b.
Productivity in the United States is higher because the United States has more
workers than those countries having low productivity.
c.
The United States could have greater productivity because its workers have
both more human capital and more physical capital per worker.
d.
None of the above is logically consistent.
10)
11)
Which of the following is human capital?
a.
a company’s cafeteria
b.
the exercise equipment in a company’s gym
c.
employees’ knowledge of the production process
d.
All of the above are correct.
Which of the following would increase productivity?
a.
an increase in the amount of equipment per-worker
b.
an increase in the knowledge and skills of workers
an increase in the number of employed workers
c.
d.
All of the above are correct.
12)
The CPI is a measure of the overall cost of
a.
producer inputs.
b.
personal imports.
goods and services bought by a typical consumer.
c.
d.
goods and services produced in the economy.
13)
Most, but not all, soccer balls used in the United States are imported from other
nations. If the price of soccer balls increases, the GDP deflator will
a.
increase, but the consumer price index will not increase.
b.
increase less than will the consumer price index.
c.
increase more than will the consumer price index.
d.
not increase, but the consumer price index will increase.
14)
Which of the following is the most accurate (correct, precise) statement about the
relationship between the nominal interest rate and the real interest rate?
a.
The real interest rate is the nominal interest rate minus the rate of inflation.
b.
The real interest rate is the nominal interest rate minus the price level.
c.
The real interest rate is the nominal interest rate times the price level.
d.
The real interest rate is the nominal interest rate times the expected price
level divided by the current price level.
15)
In 1970 Professor Fellswoop made $12,000, in 1980 he earned $24,000, in 1990 he
earned $36,000. The CPI was 40 in 1970, 60 in 1980, and 100 in 1990. Given this
information we can say that in terms of 1999 dollars, Professor Fellswoop’s salary was
highest in
a.
1970, and lowest in 1980.
b.
1990, and lowest in 1980.
c.
1980, and lowest in 1970.
d.
1990, and lowest in 1970.
PROBLEMS
1.
The GDP of Farmistan has only two goods : milk and honey.
YEAR
1
2
Price of
Milk
2
4
Quantity
of Milk
10
15
Price of
Honey
5
4
Quantity
of Honey
20
30
a. Compute the nominal GDP for each year.
b. Compute the percentage change in nominal GDP.
c. Compute the real GDP for each year, using year 1 as the base year.
d. Compute the percentage change in real GDP.
e. Compute the GDP deflator for year 2, using year 1 as the base year.
2.
The statistics for the country of Absurdistan in year 2007 show that there are 15
people who are unemployed, and 45 people who are employed. The adult population of the
country in that year was 80 people. Use this information to calculate
a. the labor force
b. the labor force participation rate
c. the unemployment rate
3.
The consumption basket for the average consumer in the Republic of Funland
contains 10 hamburgers and 15 movie tickets. The table shows their prices for 2004-2006.
The base year is 2004.
Year
Hamburgers
Movie tickets
2004
$5
$10
2005
$7
$12
2006
$7
$16
a. How much did the basket cost in 2004?
b. What is the CPI in 2005?
c. What is the inflation rate from 2004 to 2005?
4. (20 points) Explain the effects of an increase in the government deficit on the capital
markets. In particular, how are the real interest rate and investments affected by this? Draw
a graph and explain your answer. Do not forget to label the axes.