Total: 25 Points
University of British Columbia
Sample Midterm 2
Instructor: Alfred Kong
This exam has 15 multiple choice questions in Part A and 5 short questions in Part B. Complete all the
questions. Good luck.
Multiple choice questions. Each question is worth 1 point.
1) In macroeconomic analysis, the assumption that potential output (Y*) is changing is a 1) __C____
A) the adjustment process.
B) the national accounts model.
C) the long run.
D) the business cycle model.
E) the short run.
2) As the macro economy adjusts from the short run to the long run, 2) __E____
A) wages and other factor prices remain constant.
B) aggregate demand shocks cause deviations from potential output.
C) aggregate supply shocks cause deviations from potential output.
D) potential output is adjusting to close inflationary or recessionary gaps.
E) wages and other factor prices adjust to close output gaps. 3) Consider the AD/AS model. Since output in the long run is determined by Y , the only role of 3) __D____
the AD curve is to determine the price level. This is true because the
Y depends on the price level.
B) aggregate demand curve is horizontal.
C) aggregate demand curve is vertical.
D) Y is independent of the price level.
E) AS curve is upward sloping.
4) If per capita GDP in a richer country grows at a faster annual rate than in a poorer country, 4) __B____
A) whether the gap in living standards widens or closes over time depends on the absolute
size of the relative growth rates.
B) the gap between their standards of living will widen over time.
C) the gap between their standards of living will close over time.
D) the gap between their standards of living will close over time as long as the rate of
population growth is higher in the poorer country.
E) the difference in their living standards will not change over time.
5) A common measure of a country's rate of economic growth is 5) __C____
A) the capital-output ratio.
B) the marginal efficiency of capital.
C) the change in output per capita.
D) the level of output per capita.
E) the level of real gross domestic product.
6) Consider a closed economy with real GDP in the long run of $400, consumption expenditures of 6) __C___
$250, government purchases of $75, and net tax revenue of $20. What is the level of national
A) $95 B) $225 C) $75 D) $55 E) $230
7) Doug is saving money in order to purchase a new snowboard next winter. This represents using 7) __A___
A) a store of value.
B) method of barter.
C) a medium of deferred payment.
D) a unit of account.
E) a medium of exchange.
8) Fiat money has value because it 8) __E___
A) is only fractionally backed by gold.
B) can be manufactured at will by the issuing government.
C) has intrinsic value equal to its face value.
D) is fully backed by gold at a fixed ratio.
E) is generally accepted. Assets Liabilities
Reserves Bank Nort$300Balance Sheet Deposits $2000
Loans $2200 Capital $500
9) Refer to Table 27-1. Assume that Bank North is operating with no excess reserves. What is their 9) __C___
actual reserve ratio?
A) 25% B) 13.67% C) 15% D) 20% E) 12%
10) The present value of a bond is determined by the 10) __B___
A) face value and the date of maturity.
B) market rate of interest, the date of maturity, and the face value.
C) market rate of interest only.
D) marginal rate of income tax.
E) rate of inflation.
11) If the annual market rate of interest is 5 percent, an asset that promises to pay $100 after each o11) __D___
the next two years has a present value of
A) $ 90.70. B