Download Problem Set 10

Economics 102
Professor McClelland
Fall 2007
Problem Set # 10
DUE MONDAY, NOVEMBER 26, IN LECTURE, URIS G-01
Problem sets are to be turned in AT THE BEGINNING OF THE LECTURE.
Boxes will be provided at the back of Uris G-01.
Place your problem set answers in the box with your TA’s name and section on it.
NO CREDIT WILL BE GIVEN FOR LATE PROBLEM SETS.
Consists of 10 multiple choice questions from last year’s final exam. (That exam had 4 parts;
one of the 4 consisted of 20 multiple choice questions; what follows is a subset of those 20
questions.)
Instructions:
Remove this page from the attached pages. Fill in your name, and then circle
opposite each number which of five possible answers you feel is the correct
answer. Return this sheet in lecture on Monday, November 26.
NAME:
___________________________________
T.A.'s NAME:
___________________________________
CIRCLE THE CORRECT ANSWER
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Economics 102
Problem Set # 10
1.
Which of the following is an example of a final good or service?
(a)
Chocolate a bakery purchases to make cakes.
(b)
Coffee beans that are purchased by a restaurant owner from a wholesale food
distributor.
(c)
An economics textbook you purchase with the intent of selling after your
course is over.
(d)
The lumber purchased by a construction company that will be used by the
company to build a model house to show to its clients.
2.
A former worker who is no longer looking for a job is considered:
(a)
structurally unemployed.
(b)
cyclically unemployed.
(c)
frictionally unemployed.
(d)
underemployed.
(e)
none of the above.
3.
"Double-counting" of national product would result from including:
(a)
total production of autos and total production of bowling balls.
(b)
value-added of both bakers and flour mills.
(c)
total of investment expenditures and the total of government purchases of
goods and services.
(d)
consumer expenditures on bread and the value added of wheat producers.
(e)
none of the above.
4.
Assume an economy is in equilibrium at an output level of $600 billion. If government
spending increases by $30 billion, then at the output level of $600 billion, there is
(a)
an unplanned fall in inventories.
(b)
an unplanned increase in inventories.
(c)
an unplanned inventory change of zero.
(d)
either an unplanned increase or decrease in inventories depending on the value
of the marginal propensity to consume.
5.
If the price index in period 3 is 125 and the price index in period 4 is 140, the rate of
inflation between period 3 and period 4
(a)
is 10.7%.
(b)
is 12%.
(c)
is 15%.
(d)
is 20%.
(e)
cannot be determined from this information because the base year is not
known.
OVER
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6.
If a reduction of $2 million in taxes causes national income (Y) to climb by $8 million,
then the simple Keynesian model would infer a marginal propensity to consume of
(a)
0.8.
(b)
0.2.
(c)
4.0.
(d)
5.0.
(e)
Some number between 0.5 and 1.0 that cannot be computed precisely from the
information provided.
7.
During a period of high unexpected inflation:
(a)
borrowers are better off because they can pay off their loans with currency
that is worth less.
(b)
borrowers are worse off because they have to pay off their loans with currency
that is worth more.
(c)
lenders are worse off because they cannot find anyone who wants a loan.
(d)
lenders are better off because they are repaid with currency that is worth more.
(e)
none of the above.
8.
Supply-side economics argues that:
(a)
high rates of taxation and heavy regulation reduce the incentive to work, save
and invest.
(b)
we need to explain business cycle fluctuations assuming complete price and
wage flexibility.
(c)
output depends on the difference between actual and expected price levels.
(d)
we must raise taxes so that people will work harder and save more.
(e)
We must increase government regulation to encourage firms to invest more.
9.
Assuming there is no foreign trade in the economy, equilibrium is achieved when
planned or desired private saving is equal to planned investment
(a)
minus the government deficit.
(b)
plus the government deficit.
(c)
minus government spending minus taxes.
(d)
minus government spending plus taxes.
(e)
none of the above.
10. Under flexible exchange rates, the price of the British pound will depreciate relative to
the dollar if:
(a)
American desires for British goods increases relative to British desires for
American goods.
(b)
American national income increases while British national income remains
constant.
(c)
with stable real national income in both countries, prices rise in America and
prices remain steady in Britain.
(d)
other things equal, United States tourism to Britain decreases.
(e)
other things equal, Americans increase their purchases of British securities.
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