Principles of Macroeconomics (Econ 001) Signature:
Drake University, Spring 2004
William M. Boal Printed name:
MIDTERM EXAMINATION #3 VERSION B
"Long-Run Economic Growth and Inflation"
March 17, 2004
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, 30 pts total]
(1) Potential GDP increases if
a. technology advances.
b. the labor force increases.
c. the capital stock increases.
d. all of the above.
(2) To be counted as unemployed in the United
States, a person must have looked for work at least
once in the last
a. year.
b. three months.
c. four weeks.
d. week.
(3) U.S. unemployment was highest during the
a. 1990s.
b. 1970s.
c. 1950s.
d. 1930s.
(4) In the United States, the last few decades have
seen an increase in the labor-force participation rate
of
a. women.
b. men.
c. both women and men.
d. none of the above.
(5) According to "job rationing" theories of
unemployment,
a. employment is above the equilibrium level.
b. the labor market is characterized by excess
demand.
c. wages are above the equilibrium level.
d. wages are below the equilibrium level.
(6) "Job search" theories of unemployment predict
that unemployment could be reduced if
a. unemployment benefits were reduced.
b. the power of labor unions were curtailed.
c. minimum wage laws were repealed.
d. all of the above.
(7) Suppose the current capital stock is $8 trillion,
this year's gross investment is $1.2 trillion, and this
year's depreciation is $0.2 trillion. Next year's
capital stock will be
a. $9 trillion.
b. $9.2 trillion.
c. $10 trillion.
d. $10.4 trillion.
(8) A "nonrival good," by definition,
a. is produced by noncompeting firms.
b. is of the highest quality.
c. is not protected by patents, copyrights, or
licenses.
d. can be used by many people simultaneously.
(9) "Embodied" technical change can only be
exploited if
a. there are enough "bodies" (workers) to use it.
b. workers receive training.
c. it is understood as a whole.
d. new capital is installed.
(10) The three essential functions of money do not
include
a. store of value.
b. unit of account.
c. method of government finance.
d. medium of exchange.
(11) The rate of interest paid by the Federal Reserve
on bank reserves is currently
a. about three percent.
