Download EXAM 2, FALL 2OO2

ECONI110
EXAM 2, FALL 2OO2
NAME
(PRINT LAST NAME, FIRST NAME)
VERSION B
ss#
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INSTRUCTIONS: Sclcctthebggl!response
to eachquestionor statement
letteron youranswersheet.Eachcoffectresponse
counts3.75pointsout of 150.
corresponding
l.
The aggregate
demandcurveslopesdownwardto therightfor all of thetbllowing
rcasonsglggp!:
a.
thcrcalbalancos
cifcct.
the
interest
rate
effect.
b.
c.
theintemational
tradeeffect.
d.
themultipliercffect.
2.
in response
to:
Ceterisparibus,short-runaggregate
supplydecreases
a.
a decrease
in thepricelevel.
b.
a decrease
in porsonalincomctax ratcs.
c.
an inorease
in consume$expectingfuturedeclinesin incomo.
d.
an increase
in thepriceof a majorinput,suchasoil.
3.
Adversesupplyshocksleadto:
a.
a highcrpricclevelat a lowerlcvcl of output(realGDP).
b.
a lowerpricelevelat a lowerlevelof output(realGDP).
c.
a higherpricel€velat a highcrlevelof output(realGDP).
d.
a lowerpricelevelat a higherlevelof output(realGDP).
4.
lf aggregate
demandincreases
andshort-runaggregate
supplyis horizontal,
price
the
the
level_,
rcalGDP_,
and unemployment
rate_.
a.
staysthesamc;lncreases;
Increases.
b.
incrcasesi
dccrcases;
staysthesamc.
c.
staysthc same;lncreases;
clccrcascs.
staysthesameidecreases.
d.
decreasesi
5.
The realbalances
effectrefersto the:
powerof a givensumof moneythatoccurswhenthe
a.
increase
in thepurchasing
pdcc leveldecreases.
borrowingthatoccurswhcninterestrates
b.
incrcascin consumer
andbusinoss
dccreasc,
increases
multipleincrease
in incomeandspending
thatoccurswhengovernmenl
cits spending.
whenthedomesticpricclcvcl decreases.
d.
increase
in domcsticgoodspurchased
ECONI110
6.
EXAM 2, FALL 2OO2
VERSION B
If SRASis upwardsloping.an increase
in AD willl
a.
incrcaseboth real GDP andthe price level.
b.
increasereal GDP anddecreasethe price level.
c.
decreaseboth real GDP andthe price level.
d.
decreasereal GDP andincreasethe price Ievel.
Usethe graphbelowto answerthe nexttwo questions,
P.ice
l-evel
Q,', Qu
RcalGDP
'1.
Theeconomydepictedin thegraphaboveis experiencing:
a,
aninflationarygap.
gap.
D.
a rccessionary
c.
shon-runequilibriumat full employment.
d.
long-runequilibrium.
8.
of corectionif theeconomy
Whichof thefollowingbestsummarizcs
theprocess
depictedaboveis self-regulating?
pushup inputpnces,costsof productionincrease,
and
a.
Overemployed
resources
supplycurveshiftsto thelcft.
theshort-runaggregate
pushdowninputpriccs,costsof productiondecrease,
and
resources
b.
Unemployed
theshort-runaggregate
supplycurveshitisto thc right.
pushup inputprices,costsof productionincrgase,
and
c.
Overemployed
resources
theaggregatc
demandcurvcshiftsto theleft.
pushdowninputprices,coslsof productiondccrease,
and
d.
Uncmploycdrcsourccs
theaggregate
dcmandcurveshittsto theright.
9.
The long-runaggregate
supplycurveis:
(full
with thenaturalrateof unemployment
a.
horizontalat thepricelevelassociatod
emproymcnt).
gaps.
b.
a verticalline at equilibriumoutputfor all rcccssionaty
(full
vertical
level
with
the
natural
rate
of unemployment
c.
at theoutput
associated
cmploymcnt).
(full employment).
d.
horizontalat thenaturalratcof unemployment
ECON I I l0
EXAM 2, FALL 2OO2
VERSION B
Usethegraphtrelowto answerthenexttwo questions.
Price
kvel
ADr
Qe Q N
RealCDP
10.
lf theeconomyportrayedin theabovegraphis on ADoandsRASo.it is cxpenencing:
a,
fullemployment.
b.
overemployment.
an inflationarygap.
c.
gap.
d.
a recessionary
I l.
Whichof theiollowingeventswouldcauseADoto shift right to ADr ?
a.
A dec.ease
in thegeneralp.icelevel.
b.
A dccrease
in the wagcspaidto labor.
p€rsonalincome.
c.
An increasein disposable
d.
A breakthrough
in productiontechnology.
12.
rate(UN):
If theactualunemployment
rate(U) is greaterthanthenaturalunemployment
gap
a
of
labor.
a,
a reccssionary existsandthereis surplus
b_
an inflationarygapexistsandthercis a shonageof hborgapexistsandthereis a shortage
of labor.
c,
a rcccssionary
d.
an inflationarygapexistsandthereis a surplusof labor.
13.
advocate:
Economists
thatb€lievetheeconomyis self-regulating
a policyof laissez-faire.
a.
b.
discretionary
expansionary
tiscalpolicy.
contractionary
fiscalpolicy.
discretionary
a policyof savoirfaire.
d.
14.
with Classicalreasoning?
Whichof thefollowingstatements
is rot consistent
a.
Flexiblewagesensurcthatlabormarketsmovelowardfull employment.
b.
Supplycreatcsits own demand.
c.
Macroeconomic
equilibriumis likely to remainat lcssthanfull employment.
d.
Changes
in theinterestratewill equatesavingandinvostment.
ECON1110
15.
EXAM 2, FALL 2OO2
VERSION B
sothata geneElovetproduction
Thenotionthatwhateveris producedwill be consumed
of goodsandservicesis not possibleis:
with theClassicalview.
a.
Say'sLaw andis associated
with theKeyncsianview.
b.
Say'sLaw andis associated
with theClassicalview.
c.
multipliereffectandis associated
with theKeynesianview.
d.
multipliereffectandis associated
Usethetablcbelowto answerthenextfour questions.
DisposableIncome
ConsumptionSpendins
$0
$s00
$500
$ l,000
$l,500
$2,000
$2,500
$900
$1,300
$1,700
$2,100
$2,500
16.
consumption
ls:
In theaboveexample,autonomous
c.
a.
$2,500.
$0.
d.
impossibleto determine.
b.
$500.
l'7.
In theaboveexample,savingis zeroat incomeequaltol
c.
a.
$2,000.
$0.
d.
b.
$2,500.
$500.
18.
ln theaboveexample,themarginalpropensityto consumeis
c.
0.5
a.
0
d.
0.80
0.75
b.
19.
functionis:
Thealgebraicform of the aboveconsumption
a.
Yo=C+S.
b.
c = $100+ .75(Yr,).
C
=$500+.8(Yor
c
d.
MPC = (AC/AYD).
20.
ofconsumptionspendingis
model,theprimarydetcrminant
In thc Koynesian
primary
is -.
the
determinant
of
saving
and
income;theintcrcstrate.
a.
disposable
saving;
investment.
b.
supply;demand.
c.
income;disposable
income.
d.
disposable
ECONtllo
EXAM 2, FALL 2OO2
VERSIONB
Usethe equationstlelow to answerthe next threequestions.
C = $200million + .75(Yo)
I = $20million
21.
Accordingto theaboveinformation,savingat incomeequalto $800million:
function.
cannotbe determincd
from theconsumption
a.
income.
is $0; $800million is breakeven
b.
c.
is $160million.
d.
is -$40million.
22.
Accordingto theaboveinformation,equilibriumin this privatedomesticeconomy:
cannotbe detsrmined.
a.
b.
is at incomeequalto $800million.
c.
is at incomeequalto $880million.
d.
is at incomeequalto $1,000million.
21.
in investmentspendingwill,
Accordingto theabovcinformation,a $10 million decreasc
paribus:
ceteris
in equilibriumincomeof $40rnillion.
a.
causea maximumdecrease
decrease
in equilibriumincomeof $50 million.
b.
causea maximum
c.
causea maximumincreasein equilibriumincomeof $40million
incomeof $50million
in equilibrium
a maximumincrease
d.
cause
21.
aretruee.rcept:
All of thefollowingstatements
spending
the marginalpropensityto consumegivesthechangein consumption
a.
income.
to a changein disposable
thatoccursin response
=
MPC + MPS L
b.
themarginalpropensityto savcis negativcwhenconsumcrspendingis greater
cincome.
thandisposable
d.
if theMPC= 0.9,theMPS= 0.1.
25.
then:
totalexpenditure,
If totalproductionin the economyexceeds
and
increaseproduction,
dccrcases,
unplanned
inventory
businesses
experience
a.
rise.
rncome
andemfloyment
investment
andan inflationarygapwill cmerge.
exceeds
b.
consumption
gapwill necessarily
anda recessionary
consumption
mustbe lessthaninvestment
c.
emefge.
cut production'andincome
unplanned
inventoryincreases,
businesses
experience
dandemploymentfall.
26.
Il themarginalpropensityto consumeis 0.90,lhenthc valuesof thesimplespending'tax'
respectively
and
multipliersare-,
andbalanced-budget
-,
9; 10;-9
a.
b.
5; -4; I
1 0 ; 9 iI
c.
d.
l0; -9; 1
ECONI110
EXAM 2, FALL 2OO2
\.ERSION B
2'7.
Whenbusioessesbecomemore optimistic aboutfuture salesand profitsi
a.
investmentspendingincreasesandaggrcgatedemanddecrcases.
demandincreases.
b.
investment
spendingincreases
andaggregate
c.
investment
spendingdecreases
andaggregate
demanddecreases.
d.
investment
spendingdecreases
andaggregate
demandincreases.
28.
Assumean economyis at e-quilibrium
at realGDP equalto $1,800billion andnaturalreal
GDPis equalto $2,0@billion. Givenan MPCof0.80, whatis thegovemmentspending
to movethiseconomyto a full employmentequilibrium,
or tax changenecessary
assuming
a horizontalSRAScurve?
in taxes
a.
spendingor a $200billion decrease
$200billion increasein govemment
in taxes
b.
in govemment
spendingor a $50billion increase
$40billion decrease
govemment
c.
in
spendingor a $200billion increase
in taxes
$200billion decrease
d.
in govemment
spendingor a $50billion decrease
in taxes
$40billion increase
29.
Accordingto Keynes,thedepression
economyof the 1930'swasnot likely to rapidly
correctitselfbecause:
a.
Say'sLaw wastrue.
b.
inflationwastoo severc.
c.
households
only savedif paidinterest.
pricesandwageswerenot flexibledownwardd.
30.
themosteffectivemeansfor
Accordingto the Keynesian
modelof themacroeconomy,
gapis:
closinga recessionary
a.
decreases
in marginaltax rateswhichshiftSRAS.
increases
in govemmentspendingwhichshift AD.
b.
patience;theeconomywill concctitself.
c.
d.
loweringthegrowthrateof themoneysupplyto shift LRAS.
31.
A $100billion increasein govemment
spendingwhentheMPC is 0.75may
potentiallyleadto:
a.
an increasein equilibriumrealGDP by d maximumof $100billion.
b.
an increasein equilibriumrealGDP by a maximumof $400billion.
c.
a decrease
in equilibriumrealGDPby a ma,\imumof $100billion.
d.
a dccroaso
in equilibriumrealGDPby a maximumot $,100billion.
32.
that:
The Laffe.Curvesuggests
thereis sometax ratethatmaximizestaxrevenues.
a.
asthc marginaltax rateincreases.
b.
tax revenues
continueto increase
c.
highertax ratesalwayscrertean incentiveto increasework effott.
d.
tax ratesandtax revenues
arcunrelated.
33.
Decreasing
marginaltax ratesasa meansto increaseincentivcsto work, save,andinvest
with the:
is mostcloselyassociated
cSupply-siders.
a.
Classicals.
d.
Marginalists.
b.
Kcynosians.
ECONI ll0
EXAM2,FALL2(N2
\.ERSION B
34.
Increases
in govemment
spendingthatleadto decreases
in privatesectoractivityreferto:
a.
crcwdingout whichtendsto iocrease
theeffectiveness
offiscal policy.
b.
crowdingout whichtendsto decrease
theeffectiveness
of fiscalpolicy.
policylagswhichtendto increase
c.
theeffectiveness
of fiscalpolicy.
policylagswhichtendto decrease
d.
theeffectiveness
of fiscalpolicy.
35.
A proportional,
or flat, tax systemis onein which:
paythesamedollaramountin taxes,rcgaadless
a.
all taxpayers
of income.
paythesamepercentage
of income.
b.
all taxpayers
of incomein taxes,regardless
c.
thepercentage
of incomepaidin taxesstartsout flat andthendses
proponionately
asincomerises.
for a flat fee,regardless
of income.
d.
all govemment
servicescanbepurchased
36.
passes
tax
If thefederalgovemment
a budgetfor whichgovemmentspendingexceeds
revenues
at full employment,
then:
a.
a cyclicaldeficitnecessadly
exists.
b.
a structuraldeficitcxists.
c.
thebalanced-budget
amendment
becomes
invalid.
d.
thepresident
is requiredby law to vetothebudget.
37.
paymentsthatoccursin
An increasein govemmentunemployment
compensation
is
response
to a downtumin overalleconomicactivity anexampleof:
a.
anautomaticstabilizer.
b.
contractionary
fiscalpolicy.
c.
expansionary
monetarypolicy.
d.
theautonomous
spendingmultiplier.
38.
If thetax liabilityis $2,200whenincomeis $20,000and$4,800whenincomeis $40,000,
theincometax structureis:
progrcssivc.
c.
r.
regressrve.
proportional.
d.
categorical.
b.
39.
The nationaldebtis:
for oneyear.
excecdstax revenues
a.
theamountby whichgovemmentspending
percentage
go
pay
the
of taxesthat to
intereston the deficit.
b.
thesumtotalof whatthefederalgovemment
owesits creditors.
cgovemment
administration.
the
sum
total
of
spending
during
oncpresidential
d.
40.
expenditures
duringa singleyear,the resultis:
Whentax receiptsexceedgovemment
a.
a structuraldeficit.
c.
thenationaldebt.
b.
a budgetdeficit.
d.
a budgetsurplus.
41.
42.
exam2.
Bubblein "b" on yourscadtron;this denotes
"a"
Bubblein
on yourscantron;
this denotesve$ion A.
Be sureyou have answeredall 40 questions. Pint Jour Lttstname,Jirst .,ameon theJront of
this examand lurn in both this exam and rour com0latedscantron.
ECONr 110(MACRO)
EXAM2-VERSIONB
FALL 2OO2
l
L
-1.
4.
5.
6.
1.
8.
IO,
.
lt.
13.
14.
15.
16.
t'7.
18.
19.
20.
2t.
22.
23.
21.
25.
26.
2'7.
28.
29.
30.
3I,
32.
33.
3,1.
35.
36.
3'7.
38.
39.
40.
D
D
c
C
D
C
A
A
c
A
B
D
D
c
D
B
C
A
C
D
D
B
D
D
B
B
A
C
B
B
B
A
C
C
D