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Drexel University: Econ 202 Macroeconomics Practice Midterm Exam - Prof. Marco Airaudo, Exams of Introduction to Macroeconomics

A practice midterm exam for the principles of macroeconomics course at drexel university, taught by professor marco airaudo during the winter 2012 semester. The exam consists of multiple choice and short answer questions covering various topics in macroeconomics, such as net exports, consumption function, real and nominal gdp, and the consumer price index.

Typology: Exams

2011/2012

Uploaded on 02/27/2012

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Drexel University
Econ 202: Principle of Macroeconomics
Winter 2012 - Practice Midterm
Professor: Marco Airaudo Name and Section
Instructions: you have 1h and 30í to complete the exam. For the multiple choice part, you do not have to
motivate your answer (just pick what you think is the correct one). For the short answers part, you have to
write your answers within the blank space provided at the end of each question. Please label your answers
correctly. In order to get full (or even partial) credit you have to show your work.
MULTIPLE CHOICE SECTION (30 Points Total, 3 Points each)
1. Suppose that foreign prices increase. Which of the followings is most likely to happen?
(a) Net exports would increase
(b) Net exports would decrease
(c) No impact on net exports
(d) Exports will be equal to imports
2. Which of the followings will be most likely to shift the consumption function upward
(a) a stock market crash
(b) a price level increase
(c) lower real estate wealth
(d) lower interest rates
3. Suppose that between 2008 and 2009 nominal GDP in the US grew by 3% and that between the same
years ináation was 1%. The growh rate of real GDP between 2008-9 was:
(a) 2%
(b) 3%
(c) 4%
(d) we can not tell
4. Total spending in the economy is equal to:
(a) C+I+GX+IM
(b) CI+G+XIM
(c) C+IG+XIM
(d) C+I+G+XIM
5. The CPI measures
(a) the total amount of goods and services produced in the economy in a given year
(b) the average interest rate in the economy
(c) the rate of unemployment
(d) the average cost of living in the economy
6. The nationís DI increases by $500 billion, and, as a result, consumption (C) increases by $300 billion.
Therefore, the MPC equals
(a) $200 billion
(b) 1.66
(c) +0.6
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Drexel University Econ 202: Principle of Macroeconomics Winter 2012 - Practice Midterm

Professor: Marco Airaudo Name and Section Instructions: you have 1h and 30í to complete the exam. For the multiple choice part, you do not have to motivate your answer (just pick what you think is the correct one). For the short answers part, you have to write your answers within the blank space provided at the end of each question. Please label your answers correctly. In order to get full (or even partial) credit you have to show your work. MULTIPLE CHOICE SECTION (30 Points Total, 3 Points each)

  1. Suppose that foreign prices increase. Which of the followings is most likely to happen? (a) Net exports would increase (b) Net exports would decrease (c) No impact on net exports (d) Exports will be equal to imports
  2. Which of the followings will be most likely to shift the consumption function upward (a) a stock market crash (b) a price level increase (c) lower real estate wealth (d) lower interest rates
  3. Suppose that between 2008 and 2009 nominal GDP in the US grew by 3% and that between the same years ináation was 1%. The growh rate of real GDP between 2008-9 was: (a) 2% (b) 3% (c) 4% (d) we can not tell
  4. Total spending in the economy is equal to: (a) C + I + G  X + IM (b) C  I + G + X  IM (c) C + I  G + X  IM (d) C + I + G + X  IM
  5. The CPI measures (a) the total amount of goods and services produced in the economy in a given year (b) the average interest rate in the economy (c) the rate of unemployment (d) the average cost of living in the economy
  6. The nationís DI increases by $500 billion, and, as a result, consumption (C) increases by $300 billion. Therefore, the MPC equals (a) $200 billion (b) 1. (c) +0.

(d) $300 billion (e) none of the above

  1. By "hyperináation" we mean a situation where, in a country: (a) real GDP grows at a rate above 10% (b) the price levels decreases over time (c) ináation is zero (d) the price level grows at a rate that can easily go above 100%
  2. Among the followings, the best indicator of economic growth is probably (a) an increase of nominal GDP (b) an increase of real GDP (c) an increase of the price level (d) higher interest rates
  3. Today you need about 15c to buy 1 Chinese Yuan. What would be the most likely e§ects of a USD depreciation versus the Yuan (say that you would need 30c for each Yuan) (a) US net exports with China would increase (b) US net exports with China would decrease (c) US exports to China would increase, while US imports from China would decrease (d) both a. and c. are correct (e) none of the above is correct
  4. If ináation in Europe becomes larger than ináation in the US we are likely to observe

(a) an increase in the U.S. net exports (NX) with Europe (b) a decrease in the U.S. net exports (NX) with Europe (c) higher investments (I) in the U.S. (d) more government spending (G) in the U.S. SHORT ANSWER SECTION (70 points total) Please provide very short answers to the following questions

  1. 20 Points. In a Prisoners-of-War (POW) camp, the representative basket for a prisoner is made of 60 cigarettes and 10 bars of chocolate. These two goods are exchanged at the following prices 1 Cigarette 1 bar of Chocolate 2008 $1 $ 2009 $2 $1. 2010 $4 $1. (a) Compute the dollar value of the basket in each year  2008:

 2009:

 2010:

(c) A higher ináation rate in the US with respect to what seen in Europe

  1. 15 Points. Suppose that the MPC in the nation is only 0.5.

(a) What would be the change in consumption if disposable income went up by $200 billion?

(b) What would be the change in personal savings?

(c) How would the nationís consumption function change if the MPC increased to 0.8? Hint: would it become áatter or steeper?