CB2402 Midterm Exam PDF

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CB2402 Midterm Exam (C05)Question 12017 2020Product Quantity Price Quantity PricePeanuts 1,000 1 1,200 1.Peanut-butter 300 4 300 5.A very simple economy produces two goods: Peanuts and peanut-butter. The quantities produced and their corresponding prices for 2017 and 2020 are shown in the table abov...

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CB2402 Midterm Exam (C05) Question 1 2020

2017 Product

Quantity

Price

Quantity

Price

Peanuts

1,000

1.00

1,200

1.00

Peanut-butter

300

4.00

300

5.00

A very simple economy produces two goods: Peanuts and peanut-butter. The quantities produced and their corresponding prices for 2017 and 2020 are shown in the table above. Assume one-half of the peanuts are used in making the peanut-butter and the other half of the peanuts are purchased by households. Refer to the above table, What is the real GDP in 2020, using 2017 as the base year? A. B. C. D.

$2,400 $1,800 $3,000 $3,600



Question 2 A consumer price index of 120 in 2020 with a base year of 2012-2014 would mean that the cost of the market basket  A. equaled $120 in 2013. B. rose 20% from the cost of the market basket in the base year. C. equaled $120 in 2020. D. rose 120% from the cost of the market basket in the base year. 

Question 3 Which of the following would not be included in the calculated GDP? A. B. C. D.

The coffee beans sold to Starbucks. A car manufacturer buys a new robotic machine to assemble cars. A local ice-cream store sells $17,000 worth of cones and sundaes. The university tuition paid to enroll in a course

Question 4 A homemaker who is not working is categorized as A. B. C. D.

not in the labor force. a discouraged worker. employed. unemployed.

Question 5 Which of the following cause the unemployment rate to understate the true extent of joblessness?  A. inflation B. discouraged workers C. unemployed persons falsely report themselves to be actively looking for a job D. people employed in the underground economy 

Question 6 Gross domestic product is A. the total market value of final goods and services produced in the economy during a period of time. B. the total quantity of goods and services produced in the economy during a period of time. C. the total market value of goods and services in the economy. D. the total quantity of goods and services in the economy. 

Question 7 The substitution bias in the consumer price index (CPI) refers to the idea that consumers ________ the quantity of products they buy in response to price, and the CPI does not reflect this and ________ the cost of living.  A. do not change; underestimates B. change; overestimates C. do not change; overestimates D. change; underestimates 

Question 8 Which of the following would increase public saving? A. B. C. D. 

a decrease in government debt a decrease in taxes an increase in consumption spending an increase in government purchases

Question 9 Consumption spending is $8 million, planned investment spending is $6 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is GDP?  A. $26 million B. $28 million C. $18 million D. $24 million 

Question 10 Exponential growth implies that:  A. growth rates can only be positive. B. growth rates will alternate between positive and negative values in every other time period. C. relatively small differences in growth rates translates into large differences in the level of a quantity after many years of growing. D. poor countries always catch up with rich countries.

Question 11

 Refer to the above figure, the movement from A to C illustrates A. B. C. D.

a decline in capital per worker. diminishing returns to capital. an improvement in technology. diminishing returns to labor.

Question 12 Which of the following accurately describes economic growth and standards of living between 1,000,000 B.C. and 1300 A.D.?  A. Standards of living substantially declined from 1,000,000 B.C. to 1300 A.D. B. Standards of living in 1300 A.D. were substantially better than what they were in 1,000,000 B.C. C. No sustained economic growth occurred between 1,000,000 B.C. and 1300 A.D. D. Significant economic growth took place between 1,000,000 B.C. and 1300 A.D. 

Question 13

Refer to the above figure, Suppose the economy gains more capital per hour worked and experiences technological change. This is shown in the figure above by the movement from  A. B to C to D. B. B to A. C. A to C. D. A to D. 

Question 14 The advantage of using real GDP over nominal GDP is that: A. B. C. D.

real GDP takes into account the distribution of income. real GDP can be compared over time. real GDP is easier to calculate. real GDP takes into account pollution.

Question 15 Inflation that is ________ than what is expected benefits ________ and hurts ________. A. B. C. D.

less; borrowers; lenders less; lenders; no one greater; lenders; no one greater; borrowers; lenders

Question 16

 Refer to the above figure, the loanable funds market is in equilibrium, as shown in the figure above. An increase in government budget surplus could result in which of the following combinations of the real interest rate and quantity of loanable funds at a new equilibrium?  A. The real interest rate is 3 percent, and the quantity of loanable funds is $90 million. B. The real interest rate is 5 percent, and the quantity of loanable funds is $150 million. C. The real interest rate is 5 percent, and the quantity of loanable funds is $90 million. D. The real interest rate is 3 percent, and the quantity of loanable funds is $150 million. 

Question 17 In 2020, Sunny BMW, an automobile dealership, spent $10,000 on new tools for its repair shop, $10,000 on new computers for its sales division, and $50,000 on government bonds. Unsold cars and trucks were valued at $100,000 on January 1, 2020 and unsold cars and trucks were valued at $120,000 on December 31, 2020. What is Sunny BMW's total investment spending in 2020?  A. $70,000 B. $20,000 C. $90,000 D. $40,000  

Question 18 2017

2020

Product

Quantity

Price

Quantity

Price

Peanuts

1,000

1.00

1,200

1.00

Peanut-butter

300

4.00

300

5.00

A very simple economy produces two goods: Peanuts and peanut-butter. The quantities produced and their corresponding prices for 2017 and 2020 are shown in the table above. Assume one-half of the peanuts are used in making the peanut-butter and the other half of the peanuts are purchased by households. Refer to the above table, Nominal GDP in 2017 equals  A. $1,200 B. $1,700 C. $2,700 D. $2,200 

Question 19 Year

Nominal Average Hourly Earnings

CPI (1982-1984 =100)

2014

$10

100

2015

$10

90

2016

$12

108

Looking at the table above, real wages ________ from 2014 to 2015, and real wages ________ from 2015 to 2016. A. B. C. D. 

rose; rose fell; rose fell; stayed constant rose; stayed constant

Question 20 If labor productivity growth slows down in a country, this will  A. slow down the increase in nominal GDP. B. accelerate the increase in nominal GDP. C. slow down the increase in real GDP per capita. D. accelerate the increase in real GDP per capita.

Question 21 Consumption expenditures

$800

Investment expenditures

$200

Government purchases

$300

Exports

$200

Imports

$100

Wages

$800

Refer to the above table, Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals  A. $1,600. B. $2,200. C. $1,400. D. $1,200. 

Question 22 Suppose that government spending increases, shifting up the aggregate expenditure line. GDP increases from GDP1to GDP2, and this amount is $500 billion. If the MPC is 0.8, what is the distance between N and L or by how much did government spending change? 

 A. B. C. D. 

$120 billion $80 billion $100 billion $60 billion

Question 23

 Refer to the above figure, "Crowding out" of firm investment as a result of a government budget deficit is illustrated by the movement from ________ in the graph above.  A. A to C B. B to A C. A to B D. B to C 

Question 24 Which of the following is most likely to be able to sustain economic growth in an economy?  A. accumulations of economic resources B. technological change C. sustained increases in the labor force participation rate D. increases in capital per hour worked 

Question 25 The aggregate expenditure model focuses on the relationship between ________ and real GDP in the ________, assuming ________ is constant.  A. investment; long run; government spending B. consumption; short run; the inflation rate C. total spending; long run; total income D. total spending; short run; the price level

Question 26 Consider the aggregate expenditure model. If firms sell more than they expected to sell, which of the following is true?  A. There is no unplanned change in inventories. B. Government spending will go up. C. Aggregate expenditure is greater than current GDP. D. Inventories will rise, and GDP and employment will fall. 

Question 27

 Refer to the above figure, If the U.S. economy is currently at point N, which of the following could cause it to move to point K?  A. Government expenditures increase. B. Household wealth rises. C. The interest rate falls. D. Firms are pessimistic about the future. 

Question 28 Cyclical unemployment is the result of A. a slowdown in the economy. B. the ups and downs in inflation. C. a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. D. the search process of matching workers with jobs.

Question 29 A computer that is produced in 2017 is not sold until 2018. In which year's GDP will it be counted?  A. Half of the sales price will count as part of 2017 GDP and half will count as part of 2018 GDP. B. 2017 C. The production cost will count as part of 2017 GDP while the sales price will count as part of 2018 GDP. D. 2018 

Question 30 Suppose the labor force stays constant, and the working-age population stays constant, but more people who were unemployed become employed. The labor force participation rate will  A. decrease. B. remain constant. C. increase. D. not change in a way that can be predicted. 

Question 31 If GDP is currently $13 trillion and is growing at a rate of 3.5% per year, how long will it take GDP to reach $26 trillion? A. B. C. D. 

about 20 years about 40 years about 10 years about 30 years

Question 32 Economists consider full employment to occur when A. B. C. D. 

the unemployment rate consists of only frictional and structural unemployment. the sum of frictional unemployment and structural unemployment equals zero. frictional unemployment equals zero. everyone who wants a job has a job.

Question 33 Suppose you lend $1,000 at an interest rate of 10 percent for one year. Which inflation rate over the upcoming year would be most beneficial to you as the lender?  A. 0 percent. B. 10 percent. C. -6 percent. D. 6 percent. 

Question 34 If the economy is at point J, what will happen?

A. B. C. D. 

Inventories have risen above their desired level, and firms increase production. Inventories have fallen below their desired level, and firms decrease production. Inventories have risen above their desired level, and firms decrease production. Inventories have fallen below their desired level, and firms increase production.

Question 35 Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure?  A. Price level increases raise real wealth, which causes consumption spending and aggregate expenditure to decline. B. As the price level rises, government spending falls, which lowers aggregate expenditure. C. Price level increases in the United States relative to other countries raise net exports, which lowers aggregate expenditure. D. Price level increases cause firms and consumers to hold more money, which raises the interest rate. Higher interest rates lower consumption and planned investment expenditures, which lowers aggregate expenditure.

Question 36 Which one of the following is not considered a financial intermediary?  A. a bank B. an insurance company C. a credit counselor D. a pension fund

Question 37 An increase in the production of the Tesla factory in China will ______ and ______. Note: Tesla is an American electric vehicle manufacturer.  A. not change US GNP; increase China’s GNP. B. not change China’s GNP; increase China’s GDP. C. not change US GDP; decrease China’s GDP. D. increase US GDP; increase China’s GDP.

Question 38 The broadest measure of the price level that includes all final goods and services is  A. the wholesale price index. B. the producer price index. C. the consumer price index. D. the GDP deflator. 

Question 39 Total population

20,000

Working-age population

15,000

Employment

1,000

Unemployment

100

Refer to the above table, the unemployment rate for this simple economy equals A. B. C. D. 

(100/15,000) × 100. (100/1,100) × 100. (100/1,000) × 100. (100/20,000) × 100.

Question 40 Given the consumption schedule in the table below, the marginal propensity to consume is Consumption (dollars) $1,000 $1,750

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

$2,500  A. 0.85 B. 0.55 C. 0.75 D. 0.65

$5,000

Answer 1. B 2. B 3. A 4. A 5. B 6. A 7. B 8. A 9. B 10. C

11. B 12. C 13. D 14. B 15. D 16. D 17. D 18. B 19. D 20. C

21. C 22. C 23. C 24. B 25. D 26. C 27. D 28. A 29. B 30. B

31. A 32. A 33. C 34. D 35. D 36. C 37. B 38. D 39. B 40. C...