Docsity
Docsity

Prepare for your exams
Prepare for your exams

Study with the several resources on Docsity


Earn points to download
Earn points to download

Earn points by helping other students or get them with a premium plan


Guidelines and tips
Guidelines and tips

Macroeconomics Midterm: National Income & Product Accounts (Econ 001) - Prof. William M. B, Exams of Introduction to Macroeconomics

A midterm exam for the principles of macroeconomics course at drake university, fall 2005. The exam focuses on the national income and product accounts, including multiple-choice questions and problems related to real gdp, inflation, components of gdp, and value added. Students are required to answer in the boxes provided and partial credit is not given.

Typology: Exams

Pre 2010

Uploaded on 07/30/2009

koofers-user-38o
koofers-user-38o 🇺🇸

10 documents

1 / 6

Toggle sidebar

This page cannot be seen from the preview

Don't miss anything!

bg1
Principles of Macroeconomics (Econ 001) Signature:
Drake University, Fall 2005
William M. Boal Printed name:
MIDTERM EXAMINATION #2 VERSION A
"National Income and Product Accounts"
October 3, 2005
INSTRUCTIONS: This exam is closed-book, closed-notes. Simple calculators are permitted, but graphing
calculators or calculators with alphabetical keyboards are NOT permitted. Numerical answers, if rounded, must
be correct to at least 3 significant digits. Point values for each question are noted in brackets. Maximum total
points are 100.
I. Multiple choice: Circle the one best answer to each question. [2 pts each, 20 pts total]
(1) Over time, a graph of real GDP shows
a. long-run growth.
b. short-run fluctuations.
c. both (a) and (b).
d. neither (a) nor (b).
(2) Which of the following shows a strong upward
trend for the U.S. in the last few decades?
a. The unemployment rate.
b. Real GDP per capita.
c. The inflation rate.
d. The interest rate.
(3) At the peak of a business cycle, actual GDP is
a. above potential GDP.
b. below potential GDP.
c. equal to potential GDP.
d. cannot be determined from information given.
(4) In recent years, Japan experienced a negative
inflation rate of around -1%. This is an example of
a. disinflation.
b. deflation.
c. reflation.
d. recession.
(5) Suppose a bank pays an interest rate of 5 percent
on deposits and the expected inflation rate is 2
percent. The real rate of interest is
a. 2 percent.
b. 3 percent.
c. 5 percent.
d. 7 percent.
(6) Consumption spending in the national accounts
includes
a. purchases of new houses.
b. purchases of used cars.
c. spending on visits to doctors and dentists.
d. purchases of government bonds for retirement
accounts.
(7) Investment spending in the national accounts
does not include
a. purchases of new factories.
b. purchases of new homes.
c. purchases of software by businesses.
d. purchases of shares of stock in corporations.
(8) Government purchases in the national accounts
do not include
a. pay for members of the armed services.
b. social security payments.
c. school construction.
d. maintenance of national parks.
(9) Suppose a bagel shop produces and sells $30,000
of bagels using flour and other ingredients it
purchases for $5,000; workers it hires for $15,000;
and ovens it leases for $3,000. The value added by
the bagel shop is
a. $7,000.
b. $22,000.
c. $25,000.
d. $30,000.
(10) The rate at which you can buy euros with your
dollars is called
a. the market exchange rate.
b. the purchasing-power parity exchange rate.
c. the real interest rate.
d. net exports.
pf3
pf4
pf5

Partial preview of the text

Download Macroeconomics Midterm: National Income & Product Accounts (Econ 001) - Prof. William M. B and more Exams Introduction to Macroeconomics in PDF only on Docsity!

Principles of Macroeconomics (Econ 001) Signature: Drake University, Fall 2005 William M. Boal Printed name:

MIDTERM EXAMINATION #2 VERSION A

"National Income and Product Accounts"

October 3, 2005

INSTRUCTIONS: This exam is closed-book, closed-notes. Simple calculators are permitted, but graphing calculators or calculators with alphabetical keyboards are NOT permitted. Numerical answers, if rounded, must be correct to at least 3 significant digits. Point values for each question are noted in brackets. Maximum total points are 100. I. Multiple choice: Circle the one best answer to each question. [2 pts each, 20 pts total] (1) Over time, a graph of real GDP shows a. long-run growth. b. short-run fluctuations. c. both (a) and (b). d. neither (a) nor (b). (2) Which of the following shows a strong upward trend for the U.S. in the last few decades? a. The unemployment rate. b. Real GDP per capita. c. The inflation rate. d. The interest rate. (3) At the peak of a business cycle, actual GDP is a. above potential GDP. b. below potential GDP. c. equal to potential GDP. d. cannot be determined from information given. (4) In recent years, Japan experienced a negative inflation rate of around -1%. This is an example of a. disinflation. b. deflation. c. reflation. d. recession. (5) Suppose a bank pays an interest rate of 5 percent on deposits and the expected inflation rate is 2 percent. The real rate of interest is a. 2 percent. b. 3 percent. c. 5 percent. d. 7 percent. (6) Consumption spending in the national accounts includes a. purchases of new houses. b. purchases of used cars. c. spending on visits to doctors and dentists. d. purchases of government bonds for retirement accounts. (7) Investment spending in the national accounts does not include a. purchases of new factories. b. purchases of new homes. c. purchases of software by businesses. d. purchases of shares of stock in corporations. (8) Government purchases in the national accounts do not include a. pay for members of the armed services. b. social security payments. c. school construction. d. maintenance of national parks. (9) Suppose a bagel shop produces and sells $30, of bagels using flour and other ingredients it purchases for $5,000; workers it hires for $15,000; and ovens it leases for $3,000. The value added by the bagel shop is a. $7,000. b. $22,000. c. $25,000. d. $30,000. (10) The rate at which you can buy euros with your dollars is called a. the market exchange rate. b. the purchasing-power parity exchange rate. c. the real interest rate. d. net exports.

(3) [Spending components of GDP: 6 pts] The table below shows 2004 data for the United States available when this exam was written. [Hint: Some of the data are extraneous and not needed for solving this problem.] Business fixed investment $1.2 trillion Residential investment $0.7 trillion Compensation of employees $6.7 trillion Business inventories at end of year $1.7 trillion Business inventories at beginning of year $1.6 trillion Depreciation $1.4 trillion

a. Compute inventory investment $

trillion

b. Compute gross investment (I) $

trillion

c. Compute net investment $

trillion

(4) [Spending components of GDP: 6 pts] The table below shows 2002 data for the United States available when this exam was written. [Hint: Some of the data are extraneous and not needed for solving this problem.] Gross investment $1.6 trillion Government purchases $2.0 trillion Imports $1.4 trillion National defense $0.4 trillion Exports $1.0 trillion Corporate profits $0.9 trillion Consumption $7.4 trillion

a. Compute net exports (X). $

trillion

b. Compute GDP $

trillion

c. Compute national saving (S). $

trillion

(5) [Real GDP and inflation: 12 pts] The following table shows nominal (or “current-dollar”)

GDP and the growth rate of real GDP for the U.S. Compute real GDP, the GDP price index,

and the rate of inflation and fill in the unshaded boxes below.

Year Nominal GDP (billions of dollars) Growth rate of real GDP Real GDP (billions of 1999 dollars) GDP price index or price deflator (base year = 1999) to the nearest tenth Rate of inflation (to the nearest tenth of a percent)

(6) [Inflation and the CPI: 2 pts] The federal minimum wage was introduced at $0. per hour in October 1938, when the CPI was about 14.0. The CPI is now about 197. Compute the value of the 1938 minimum wage in today's dollars to the nearest cent.

(7) [Inflation: 2 pts] The CPI was 196.4 in August 2005 and 189.5 in August 2004. Compute the annual rate of inflation from August 2004 to August 2005 to the nearest

tenth of a percentage point. %

(8) [GDP and real GDP: 16 pts] In an imaginary country, only two final goods are produced—

food and appliances—as shown in the following table.

Year Food Appliances Price Quantity Price Quantity 2003 $4 100 $6 100 2004 $4 200 $16 100 Use the data above to complete the following table. Compute the growth rate of real GDP, the level of real GDP, and the GDP deflator using the same method used by the U.S. Bureau of Economic Analysis.

2003 2004 Growth rate

GDP (also called "nominal GDP" or "current-dollar GDP")

Real GDP (base year = 2003) $ $ %

GDP deflator or price index (base year = 2003)