Download Principles of Macroeconomics - Second Midterm Exam with Answers | ECON 2010 and more Exams Introduction to Macroeconomics in PDF only on Docsity!
ECON 2010, SPRING 2012, 2nd MIDTERM EXAMINATION
QUESTION PAPER WITH ANDWER KEY.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
- If real GDP in a small country in 2005 is $8 billion and real GDP in the same country in 2006 is $8.
billion, the growth rate of real GDP between 2005 and 2006
A) is 3.0%.
B) is 3.6%.
C) is 3.75%.
D) cannot be determined from the information given.
- If you invest $10,000 in a bond that earns 8% interest per year, how many years will it take to
double your money?
A) 1 year and 3 months B) 2 years and 6 months
C) 8 years D) 8 years and 9 months
- Human capital refers to which of the following?
A) the accumulated knowledge and skills workers acquire from education and training or from
their life experiences
B) manufactured goods that are used to produce other goods and services
C) the quantity of goods and services that can be produced by one worker or by one hour of
work
D) physical equipment that is made by human laborers, not machines
- Liquidity refers to
A) the number of times a dollar changes hands in the creation of GDP in an economy.
B) the ease with a stock can be traded for a bond.
C) the number of shares of stock a corporation issues.
D) the ease with which a financial security can be traded for cash.
- In a closed economy, private saving is equal to which of the following? ( Y =
GDP,
C =
Consumption, G = Government purchases, T = Taxes, and TR = Transfers)
A) Y - G - T B) Y + TR - C - T C) Y - G - T + TR D) Y - C - T
- The demand for loanable funds is downward sloping because the ________ the interest rate, the
__________ the number of profitable investment projects a firm can undertake, and the __________ the
quantity demanded of loanable funds.
A) lower; smaller; greater B) greater; greater; greater
C) lower; greater; greater D) greater; smaller; greater
Figure 9- 1
- Refer to Figure 9-1. Which of the following is consistent with the graph depicted above?
A) Households become spendthrifts and begin to save less.
B) An expected recession decreases the profitability of new investment.
C) Technological change increases the profitability of new investment.
D) The government runs a budget surplus.
- Which of the following government provisions would help increase the accumulation of
knowledge capital?
A) copyrights B) education subsidies
C) patents D) All of the above are correct.
- Which of the following can explain why some countries have not experienced relatively high
growth rates in real GDP per capita despite relatively low initial levels of real GDP per capita?
A) Many of these developing countries do not have a functioning court system that can enforce
laws.
B) Countries that are relatively poor are likely to have a lower quality of health care.
C) Countries that are relatively poor are more likely to experience wars and revolutions.
D) all of the above
- The aggregate expenditure model focuses on the relationship between ________ and ________ in
the short run, assuming ________ is constant.
A) total spending; real GDP; total income B) total production; total income; real GDP
C) total spending; real GDP; the price level D) total income; real GDP; the price level
- An unplanned increase in inventories results from
A) an increase in planned investment.
B) actual investment that is greater than planned investment.
C) actual investment that is less than planned investment.
D) a decrease in planned investment.
- Firms in a small economy planned that inventories would grow over the past year by $300,000.
Over that year, inventories actually grew by $400,000. This implies that
A) there was an unplanned decrease in inventories that year.
B) there was a planned decrease in inventories that year.
C) aggregate expenditure that year was equal to GDP that year.
D) aggregate expenditure that year was less than GDP that year.
- The five most important variables that determine the level of consumption are
A) government purchases, interest rates, income, taxes, and transfers
B) government purchases, saving account balances, wealth, interest rates, portfolio balances
C) wealth, savings account balances, checking account balances, stock portfolio balances, and
bond portfolio balances
D) disposable income, wealth, expected future income, price level, and interest rate
MPC + MPS =
A) 0. B) 0.5. C) 1. D) 100.
- Which of the following best describes the "wealth effect"?
A) When the price level falls, the nominal value of household wealth falls.
B) When the price level falls, the real value of household wealth falls.
C) When the price level falls, the real value of household wealth rises.
D) When the price level falls, the nominal value of household wealth rises.
- An increase in the price level results in a(n) ________ in the quantity of real GDP demanded
because ________.
A) increase; a higher price level increases consumption, investment, and net exports.
B) increase; a higher price level reduces consumption, investment, and net exports.
C) decrease; a higher price level reduces consumption, investment, and net exports.
D) decrease; a higher price level increases consumption, investment, and net exports.
Figure 12
-
- Refer to Figure 12
-
Ceteris paribus
, an increase in the price level would be represented by a
movement from
A) AD
to AD
2
. B) AD
to AD
1
C) point A to point B. D) point B to point A.
- The level of aggregate supply in the long-run is not affected by
A) changes in the capital stock. B) changes in the number of workers.
C) changes in the price level. D) changes in technology.
Figure 11- 1
- Refer to Figure 11-1. According to the figure above, at what point is aggregate expenditure greater
than GDP?
A) J B) K
C)
L
D) none of the above
- Which of the following is one reason for the decline in aggregate demand that led to the recession
of 2007-2009?
A) the financial crisis B) increases in housing prices
C) falling oil prices D) a decline in government spending
- If an increase in autonomous consumption spending of $10 million results in a $50 million increase
in equilibrium real GDP, then
A) the MPC is 0.5. B) the MPC is 0.75.
C) the MPC is 0.8. D) the MPC is 0.9.
- Full
employment GDP is also known as
A) realized GDP. B) potential GDP.
C) balanced-budget GDP. D) politico-economic GDP.
Answer Key
Testname: ECON2010 SPRING 12 M
1) C
2) D
3) A
4) D
5) B
6) C
7) C
8) D
9) D
10) C
11) B
12) B
13) D
14) D
15) D
16) C
17) C
18) C
19) D
20) C
21) A
22) A
23) C
24) B
25) C
