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Midterm

ECO 2142 Study Guide - Midterm Guide: Debit Card, Real Wages, Shortage


Department
Economics
Course Code
ECO 2142
Professor
Yves Tehou
Study Guide
Midterm

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ECO 2142 – MACROECONOMICS THEORY I
Midterm exam #1, October 22, 2014
LAST NAME_______________________________FIRST NAME________________________
STUDENT ID ____________________________
Instructions:
1. The exam lasts 1 hour and 15mns.
2. The exam is worth 100 points in total: 2.5 points for each question.
3. Write your answers in the blanks below. You won’t get credit for circled answers.
4. There is no need to explain your answers.
5. Good luck!
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Suppose production and prices of pizzas and calzones in 1997 and 2013 are as follows:
Year Quantity of pizzas Price of pizzas Quantity of calzones Price of calzones
2003 25 $5 25 $5
2013 100 $10 50 $10
1. What are the values of nominal GDP for 2003 and 2013, respectively?
A) A $250; $1,500.
B) $250; $750.
C) $500; $750.
D) $500; $1,500.
E) None of the answers is correct.
2. Assume that 2003 is the base year. What are the values of real GDP for 2003 and 2013, respectively?
A) $500; $750.
B) $250; $1,500.
C) $250; $750.
D) $500; $1,500.
E) None of the answers is correct.
3. The profits from a French owned company in Canada are included in Canadian _____ and French ______.
A) GDP; GNP.
B) GDP; GDP.
C) GNP; GDP.
D) GNP; GNP.
E) All of the above answers
4. Policy makers can become concerned if the unemployment rate is too low because:
A) output will increase.
B) output will decrease.
C) an exchange rate crisis might occur.

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D) inflation might increase
E) They may win the elections
5. Which of the following conditions must be satisfied in a closed economy?
A) There is NO government
B) Private saving equals investment.
C) There is no government spending or taxes.
D) Exports equal imports.
E) Total saving equals investment.
6. Equilibrium in the goods market requires that:
A) Equilibrium in the market of all the goods
B) production equals income.
C) production equals demand.
D) consumption equals saving.
E) government spending equals taxes minus transfers.
7. An increase in the marginal propensity to consume from .5 to .7 will cause:
A) the ZZ line to become steeper and a given change in government spending (G) to have a smaller effect on output.
B) the ZZ line to become flatter and a given change in government spending (G) to have a smaller effect on output.
C) the ZZ line to become steeper and a given change in government spending (G) to have a larger effect on output.
D) the ZZ line to become flatter and a given change in government spending (G) to have a larger effect on output.
E) None of the above.
8. A rise in investment confidence is shown by
A) An upward shift in the ZZ curve.
B) A downward shift in the 45-degree line.
C) A steeper ZZ curve without any shifts.
D) A flatter ZZ curve without any shifts.
E) A flatter ZZ curve and also an upward shift.
9. The higher the MPS, the ____ is the ZZ curve, and the _____ is the fluctuation in the short run GDP.
A) Flatter; smaller
B) Flatter; larger
C) Steeper; smaller
D) Steeper; larger
E) The fluctuation in short run GDP is not related to the size of the MPS.
10. Let the goods market multiplier to be equal to 10. Suppose some private firms have gone into bankruptcy because of the
stock market crash. If the losses in investment expenditures due to these bankruptcies are equal to $25,000,000, then the
change in GDP would be equal to:
A) 0
B) $250,000,000.
C) $500,000,000.
D) -$250,000,000.
E) -$500,000,000.
11. In the Y=Z model, if Y <!Z, then unplanned inventory would _____ and the price level would _____.
A) Increase; increase.
B) Increase; decrease.
C) Increase; stay constant.
D) Decrease; increase.
E) Decrease; stay constant.
12. Based on the information presented below, the equation representing the consumption for the economy is ___ and the
equilibrium level of GDP is _____. There is no government and this is a closed economy.
GDP (Y) Consumption (C) Saving (S) Investment (I)
$0 $60 $-60 $100
100 120 -20 100
200 180 20 100
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