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ECON 1BB3 Study Guide - Midterm Guide: Pencil, Baseball Cap, Money SupplyExam

Course Code
Bridget O' Shaughnessy
Study Guide

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Introductory Macroeconomics
Sections C02, C03, C04
Term Test #2
March 13, 2010
This examination paper includes 11 pages including the title page and 43 questions. You are re-
sponsible for ensuring that your copy of the paper is complete. Please bring any discrepancy to
the attention of your invigilator.
Special Instructions:
Only the McMaster Standard (Casio - FX991) Calculator may be used. This test paper
must be returned along with the scan sheet. Write your name and student number on the
test paper and the scan sheet. If you are writing in the wrong room, you will lose 5 points
off your test score. If you are wearing a baseball cap, please turn it so the peak is in the
back. Please turn off all cell phones. There should be no electronic devices at your seat
other than a calculator. All books and bags must be left at the front of the room. You will
need your student ID card at your desk, along with your calculator, a pencil, and a pen. If
you complete the short answer section in pencil your test will not be re-graded if there is
a dispute. Use an HB pencil to fill in the scan sheet. If a TA has to grade your scan sheet
by hand, you will lose 5 points off your test score. You cannot fill in the version number
of your test paper on the scan sheet.
Part A: Multiple Choice Questions: There are 40 multiple choice questions. Please record
your answers on the scan answer sheet provided.
Part B: Short Answer Questions: There are 3 short answer questions. Please record your
answers on the test paper.
Part A – Multiple Choice
Part B – Short Answer

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The scanner, which reads the sheets, senses the shaded areas by their non-reflection of light. A
heavy mark must be made, completely filling the circular bubble, with a HB pencil. Marks made
with a pen or felt-tip marker will NOT be sensed. Erasures must be through or the scanner may
still sense a mark. Do NOT use correction fluid on the sheets. Do NOT put any unnecessary
marks or writing on the sheets.
1. Print your name, student number, course name, section number and the date in the
space provided at the top of Side 1 (red side) of the form.
2. Mark your student number in the space provided on the sheet on Side 1 and fill in
the corresponding bubbles underneath.
3. Mark only ONE choice from the alternatives (1,2,3,4,5, or A,B,C,D,E) provided
for each question. If there is a True/False question, enter response of 1 (or A) as
True, and 2 (or B) as False. The question number is to the left of the bubbles.
Make sure that the number of the question on the scan sheet is the same as the
question number on the test paper.
4. Pay particular attention to the Marking Directions on the form.
5. Begin answering questions using the first set of bubbles, marked “1".

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Part A - Multiple Choice (40 points)
Identify the choice that best completes the statement or answers the question. Answer on the scan sheet provided.
1. In an economy consisting of only households and firms, GDP can be computed by
a. adding up the total expenditures of households.
b. adding up the total income paid by firms.
c. Either a or b are correct.
d. None of the above are correct.
2. Cyclical unemployment refers to
a. the relation between the probability of unemployment and a worker's changing level of
b. year-to-year fluctuations of unemployment around its natural rate.
c. how often a worker is likely to be employed during her lifetime.
d. long-term trends in unemployment.
e. None of the above are correct.
Table 24-5
The table below pertains to an economy with only two goods -- books and calculators. The fixed basket consists of
5 book and 10 calculators.
Year Price of Books Price of Calculators
2005 $24 $8
2006 $30 $12
2007 $32 $15
3. Refer to Table 24-5. Using 2006 as the base year, the consumer price index is
a. 200 in 2005, 270 in 2006, and 310 in 2007
b. 100 in 2005, 135 in 2006, and 155 in 2007
c. 74.07 in 2005, 100 in 2006, and 114.81 in 2007
d. 78.22 in 2005, 100 in 2006, and 121.10 in 2007
e. None of the above is correct.
4. Suppose GDP consists of wheat and rice. In 2006, 20 bushels of wheat are sold at $4 per bushel, and 10 bushels of
rice are sold at $2 per bushel. If the price of wheat was $2 per bushel and the price of rice was $1 per bushel in
2001, the base year, nominal 2006 GDP is
a. $40, real 2006 GDP is $100, and the GDP deflator is 50.
b. $50, real 2006 GDP is $100, and the GDP deflator is 200.
c. $100, real 2006 GDP is $50, and the GDP deflator is 200.
d. $100, real 2006 GDP is $50, and the GDP deflator is 50.
5. Human capital is the
a. knowledge and skills that workers acquire through education, training, and experience.
b. total number of hours worked in an economy.
c. stock of equipment and structures that is used to produce goods and services.
d. same thing as technological knowledge.
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