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Concordia UniversityDepartment of EconomicsECON 203INTRODUCTION TO MACROECONOMICSWinter 2013COMMON FINAL EXAMINATION VERSION 1 AND ANSWERSFAMILY NAMEGIVEN NAMESSTUDENT NUMBER Please read all instructions carefully1This is a threehour exam 180 minutes The questions are worth 150 marks altogether It is a good strategy to spend one minute per mark for your answers 150 minutes and spend the remaining time 30 minutes to review your answers2The exam consists of four partsiPart I 25 multiplechoice questions 25 marksPart II Conceptual questions transformed into 25 multiplechoice questions 25 marksPart III Five long questions transformed into 60 multiplechoice questions 60 marks and Part IV Multipart policy questions answer all parts 40 marks3Write your name student ID and answers to the multiplechoice questions parts I II and III on the computer scansheet with a PENCIL For Part IV write all your answers on this exam with pen or pencil Do not use additional booklets4You are allowed to use a nonprogrammable calculator and a dictionary5You are not allowed to tear any pages out of this exam6NOTE The last three pages in the exam pages 22 23 24 are BLANK Please use these blank pages as scrap papersGradesParts IIIIII Part IV TotalPart I Multiple Choice Questions Total25 marks1 Suppose you have the following measure of nominal GDP by the income approachPYWBICCATINPY4001002502501000Now an increase in the average wage rate in the economy increases employment income by 2 percent without any change in total employment or real GDP As a result the costs of production willand if businesses raise prices to pass on these changed costs to buyers prices will change by A Increase 2B Increase 4C Remain constant 2D Remain constant 4E None of the answers is correct2 Suppose production and prices of pizzas and calzones in 1997 and 2013 are as followsYear Quantity of pizzas Price of pizzas Quantity of calzones Price of calzones1997 25 5 25 52013 100 10 50 10Assume that 1997 is the base year What are the values of real GDP for 1997 and 2013 respectivelyA 250 750B 250 1500C 500 750D 500 1500E None of the answers is correct 3 In the short run using the income approach PYWBICCATIN a rise in wage rates without an increase in labour productivity willA Leave both real and nominal GDP unchangedB Reduce both nominal and real GDPC Increase both real and nominal GDPD Increase nominal GDP with no change in real GDPE Increase real GDP with no change in nominal GDP4 Which of the following is are CORRECTAUnanticipated deflation benefits borrowersBReal interest rates are always equal to zeroCGDP is always higher than GNPDThe natural rate of unemployment can be different from the actual measured unemployment rateEBoth A and B are correct5 In the YAE model if YAE then unplanned inventory wouldand the price level would AIncrease increaseBIncrease decreaseCIncrease stay constantDDecrease increaseEDecrease stay constant6 The crucial difference between the YAE model and the ADASLAS model is that the YAE assumes that price levels areTo represent the YAE model in the ADASLAS model thecurve is A Fixed AS verticalB Fixed AS horizontalC Fixed AD verticalD Fixed AD horizontalE Flexible AS upwardsloping27 The potential output line or curve Yp isA Vertical because it shows that price level changes will not affect the value of YpB Vertical because if Yp growth exceeds actual Y growth the natural unemployment rate will riseC Upwardsloping because it shows that a higher price level will lead to a higher real outputD Upwardsloping because it shows that a higher price level will lead to a higher nominal outputE None of the answers is correct8 Based on the information presented below the equation representing the consumption for the economy isand the equilibrium level of GDP isThere is no government and this is a closed economyConsumption CGDP YSaving SInvestment I06060100100120201002001802010030024060100400300100100500360140100A C6006Y 400B C6004Y 400C C40075Y 450D C6008Y 500E None of the answers is correct9 Other things remaining the same if households suddenly decide to save more regardless of the level of income then the consumption function willand the goods market multiplier will A Become steeper because the marginal propensity to consume MPC falls fallB Remain unchanged but the savings function will shift downward fallC Become flatter because the marginal propensity to save MPS rises riseD Make a parallel shift downward as autonomous consumption expenditure falls fallE Make a parallel shift downward as autonomous consumption expenditure falls remain constant10Which of the following best describes automatic builtin stabilizers in CanadaA Interest rates automatically fall as GDP fallsB Income tax collections automatically fall as GDP fallsC Autonomous government spending automatically rises as GDP fallsD The size of the autonomous goods market multiplier varies inversely with the level of GDPE All of the answers are correct11 The government wants to spend more money on building lowincome housing If it wants the spending to have maximum effect on economic growth which of the following saving equations would it prefer to seeA S8008YTB S9007YTC S 14006YTD S 6005YTE S 3004YT12Suppose the government raises its revenue by a net tax of 25 percent on income t025 the marginal propensity to consume out of disposable aftertax income is 08 and the government has an outstanding public debt of 800 In addition the autonomous expenditure by the household and business sectors CI is 270 and government expenditure is 450 What is 00the debt to GDP ratioA 2222B 3333C 4444D 5555E None of the answers is correct13Greece has recently introduced austerity plans into its economy in an effort to reign in its government debts by cutting government expenditure on education health care and the hiring of public servants Which of the following observations will lessen the negative impact of these spending cuts on the Greeces GDP 3
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