CB2402 Makeup Midterm 2017/18 PDF

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1. The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2013. Table I. Year Price of Waffles Quantity of Waffles Price of Pancakes Quantity of Pancakes 2010 $2 80 $1 100 2011 $2 100 $2 120 2012 $2 120 $3 150 2013 $4 150 $3 200 In 201...

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1. The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2013.

Table I. Year

Price of

Quantity of Waffles

Price of Pancakes

Waffles

Quantity of Pancakes

2010

$2.00

80

$1.00

100

2011

$2.00

100

$2.00

120

2012

$2.00

120

$3.00

150

2013

$4.00

150

$3.00

200

In 2010, this country's nominal GDP was a. $260. b. $440. c. $620. d. $760.

Answer: a 2. Refer to Table I. In 2010, this country's real GDP was a. $620. b. $260. c. $400. d. $630. ANSWER:

a

3. Refer to Table I. In 2013, this country's GDP deflator was a. 1.0. b. 100.0. c. 171.4. d. 240.0.

ANSWER:

b

4. Refer to Table I. From 2012 to 2013, this country's output grew a. 28.2%. b. 29.0%. c. 29.6%. d. 73.9%.

ANSWER:

b

5. The table below pertains to Studious, an economy in which the typical consumer’s basket consists of 5 books and 10 calculators.

Table II

Year 2012 2013 2014

Price of a Book $24 $30 $32

Price of a Calculator $9 $11 $12

If 2013 is the base year, then the consumer price index was a. 80.8 in 2012, 100 in 2013, and 107.7 in 2014. b. 80.5 in 2012, 100 in 2013, and 107.3 in 2014. c. 247.5 in 2012, 307.5 in 2013, and 330 in 2014. d. 210 in 2012, 260 in 2013, and 280 in 2014. ANSWER:

a

6. Refer to Table II. The inflation rate was a. 24.3 percent in 2013 and 22.5 percent in 2014. b. 23.8 percent in 2013 and 9.5 percent in 2014. c. 23.8 percent in 2013 and 7.7 percent in 2014. d. 24.3 percent in 2013 and 7.3 percent in 2014.

ANSWER:

c

7. Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey’s 2006 salary in 2001 dollars is a. $47,768.36. b. $63,214.29. c. $84,550.00. d. $142,768.36.

ANSWER:

b

8. Suppose that the price of chicken rises sharply compared to the price of turkey. People buy more turkey and less chicken than they did in the CPI base year. In this situation the CPI will tend to _____ inflation as a result of _____ bias. A) overstate; substitution B) understate; substitution C) overstate; quality adjustment D) understate; quality adjustment Answer: A 9. Unexpectedly low inflation ______ borrowers and _____ lenders. A) helps; hurts B) helps; helps C) hurts; hurts D) hurts; helps Answer: D

Which of the following would contribute to a sustained high rate of economic growth in the long run in an economy? A) growth in capital per hour worked accompanied by technological change B) increases in labor force participation rates as workers who are out of the labor force pursue rising wages C) a shift of workers in the economy from the agricultural sector to the nonagricultural sector D) an influx of immigrant labor into an economy without any accompanying technological change Answer: A 10.

11. In terms of economic growth, the key measure of the standard of living is A) real GDP. B) nominal GDP. C) real GDP per capita. D) nominal GDP per capita. Answer: C 12. If GDP is currently $13 trillion and is growing at a rate of 2.3% per year, how long will it take GDP to reach $26 trillion? A) about 15 years B) about 17 years C) about 25 years D) about 30 years Answer: D Consider the following data for a closed economy: Scenario 21-1 Y = $12 trillion

C = $8 trillion I = $2 trillion G = $2 trillion TR = $2 trillion T = $3 trillion 13. Refer to Scenario 21-1. Based on the information above, what is the level of private saving in the economy? A) $3 trillion B) $4 trillion C) $5 trillion D) $8 trillion Answer: A 14. Refer to Scenario 21-1. Based on the information above, what is the level of public saving? A) $0 B) $1 trillion C) $2 trillion D) negative $1 trillion (a deficit of $1 trillion) Answer: D 15. Under which of the following circumstances would private saving be positive in a closed economy? A) Y = $10 trillion C = $5 trillion TR = $2 trillion G = $2 trillion public saving = $1 trillion B) Y = $9 trillion C = $5 trillion TR = $1 trillion G = $1 trillion public saving = $3 trillion C) Y = $8 trillion C = $2 trillion TR = $4 trillion G = $2 trillion public saving = $4 trillion D) Y = $6 trillion C = $2 trillion TR = $8 trillion G = $3 trillion public saving = $1 trillion Answer: A 16. 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; greater; greater B) lower; smaller; greater C) greater; greater; greater D) greater; smaller; greater Answer: A Figure 21-1

17. Refer to Figure 21-1. Which of the following is consistent with the graph depicted above? A) An expected recession decreases the profitability of new investment. B) Technological change increases the profitability of new investment. C) The government runs a budget surplus. D) Households become spendthrifts and begin to save less. Answer: B

Figure 21-3

18. Refer to Figure 21-3. Which of the following is consistent with the graph depicted above? A) Taxes are changed so that real interest income is taxed rather than nominal interest income. B) An expected recession decreases the profitability of new investment. C) The government runs a budget deficit. D) Technological change increases the profitability of new investment. Answer: A If real GDP per capita in the United States is $8,000, what will real GDP per capita in the United States be after 5 years if real GDP per capita grows at an annual rate of 3.2%? A) $8,520 B) $9,280 C) $9,365 D) $10,560 Answer: C

19.

Table 22-1

Country Sweden Ireland

GDP (billions of dollars) $3.85 2.23

Population (millions of people) 9.05 4.21

20. Refer to Table 22-1. Based on the table above, which country has a higher standard of living and why? A) Sweden has a higher standard of living because their GDP is higher. B) Ireland has a higher standard of living because their GDP per capita is higher. C) Sweden has a higher standard of living because their GDP per capita is higher. D) Ireland has a higher standard of living because growth in GDP is greater in Ireland than in Sweden.

Answer: B

Figure 22-1

21. Refer to Figure 22-1. Diminishing marginal returns is illustrated in the per-worker production function in the figure above by a movement from A) A to C. B) B to C. C) C to D. D) D to C. Answer: A 22. Refer to Figure 22-1. Technological change is illustrated in the per-worker production function in the figure above by a movement from A) A to B. B) B to C. C) B to A. D) D to C. Answer: B 23. Refer to Figure 22-1. Within a country, the impact of wars and revolutions and their subsequent destruction of capital is reflected in the per-worker production function in the figure above by a movement from A) A to B. B) B to C. C) B to A. D) C to A. Answer: D 24. Refer to Figure 22-1. Many countries in Africa strongly discouraged and prohibited foreign direct investment in the 1950s and 1960s. By doing so, these countries were

essentially preventing a moment from A) A to B. B) B to C. C) B to A. D) D to C. Answer: B Table 23-3 Consumption (dollars) $1,200 2,100 3,000

Disposable Income (dollars) $3,000 4,000 5,000

25. Refer to Table 23-3. Given the consumption schedule in the table above, the marginal propensity to consume is A) 0.1. B) 0.9. B) 0.3. D) 0.6. Answer: B 26. Refer to Table 23-3. Given the consumption schedule in the table above, the marginal propensity to save is A) 0.4. B) 0.7. C) 0.1. D) 0.9. Answer: C 27. If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP, then A) the multiplier is 0.1. B) the multiplier is 10. C) the multiplier is 1. D) the multiplier is 100. Answer: B 28. If an increase in autonomous consumption spending of $25 million results in a $100 million increase in equilibrium real GDP, then A) the MPC is 0.25. B) the MPC is 0.8. C) the MPC is 0.75. D) the MPC is 2.5. Answer: C

29. A general formula for the multiplier is A) . B)

.

C) C)

. .

Answer: D 30. All of the following are true statements about the multiplier except A) the multiplier rises as the MPC rises. B) the smaller the MPS, the larger the multiplier. C) the multiplier effect occurs when autonomous expenditure changes. D) the multiplier is a value between zero and one. Answer: D 31. The ________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure, holding constant all other factors that affect aggregate expenditure. A) savings line B) aggregate demand curve C) 45-degree line D) consumption function Answer: B 32. An increase in the price level ________ real wealth, which causes consumption to ________. A) lowers; increase B) raises; increase C) lowers; decrease D) raises; decrease Answer: C 33. Which of the following is one explanation as to why the aggregate demand curve slopes downward? A) Decreases in the price level raise the interest rate and increase consumption spending. B) Decreases in the price level raise the interest rate and increase investment spending. C) Decreases in the U.S. price level relative to the price level in other countries lower net exports. D) Decreases in the price level raise real wealth and increase consumption spending. Answer: D 34. An increase in the price level will A) shift the aggregate demand curve to the left. B) shift the aggregate demand curve to the right.

C) move the economy up along a stationary aggregate demand curve. D) move the economy down along a stationary aggregate demand curve. Answer: C Figure 24-1

35. Refer to Figure 24-1. Ceteris paribus, an increase in interest rates would be represented by a movement from A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A. Answer: B 36. Refer to Figure 24-1. Ceteris paribus, an increase in personal income taxes would be represented by a movement from A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A. Answer: B

37. An increase in aggregate demand causes an increase in ________ only in the short run, but causes an increase in ________ in both the short run and the long run. A) the price level; real GDP B) real GDP; real GDP C) the price level; the price level D) real GDP; the price level Answer: D

38.

A decrease in aggregate demand in the economy will have what effect on macroeconomic

equilibrium in the long run? A) The price level will fall, and the level of GDP will be unaffected. B) The price level will fall, and the level of GDP will fall. C) The price level will rise, and the level of GDP will fall. D) The price level will rise, and the level of GDP will be unaffected. Answer: A Figure 24-3

39. Refer to Figure 24-3. Suppose the economy is at point A. If investment spending increases in the economy, where will the eventual long-run equilibrium be? A) A B) B C) C D) D Answer: C 40. Refer to Figure 24-3. Suppose the economy is at point A. If the economy experiences a supply shock, where will the eventual short-run equilibrium be? A) A B) B C) C D) D Answer: B...