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Midterm

Practice Midterm 1.pdf

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Department
Economics
Course
ECO1102
Professor
Serge Nadeau
Semester
Fall

Description
University of Ottawa ECO1102 B Name________________________ Midterm # 1 (October 21, 2011) Student number________________ Instructions: Please fill in your name and student number on every page of the exam questionnaire and on the NCS sheet. Use the NCS sheet to answer the Multiple Choice questions. There are 43 questions in total (41 multiple choice and 3 short-answer questions). This exam has 10 pages—check that this copy has all of them. Good luck Multiple-Choice Questions (82 points—2 points per question) Identify the letter of the choice that best completes the statement or answers the question. 1. Which of the following measures a nation's standard of living? a. real GDP b. real GDP per person c. nominal GDP d. nominal GDP per person 2. In an economy consisting of only households and firms, how can GDP be computed? a. by adding up the total expenditures of households and subtracting savings b. by adding up the income paid by firms only in exchange for labour c. by adding up either total income paid by firms, or total expenditures of households, but not both d. by adding up both the total expenditures of households and total income paid by firms 3. Aprofessional gambler moves from a province where gambling is illegal to a province where gambling is legal. What impact does this move have on Canada’s GDP? a. It raises GDP. b. It decreases GDP. c. It does not change GDP because gambling is never included in GDP. d. It does not change GDP because in either case his income is included. 4. Over time, people have come to rely more on market-produced goods and less on goods that they produce for themselves. What would this change do by itself? a. It would make GDP fall over time. b. It would not make any change in GDP over time. c. It would make GDP rise over time. d. It would change GDP, but in an uncertain direction. 5. How are goods that go into inventory and are not sold during the current period treated in GDP terms? a. They are counted as intermediate goods and so are not included in current-period GDP. b. They are counted in current GDP only if the firmthat produced them sells them to another firm. c. They are included in current-period GDP as inventory investment. d. They are included in current-period GDP as consumption. 6. If a Canadian citizen buys a television made in Korea made by a Korean firm, what is the impact on net exports and GDP? a. Canadian net exports decrease, and Canadian GDPdecreases. b. Canadian net exports are unaffected, and Canadian GDP decreases. c. Canadian net exports are unaffected, and Canadian GDP is unaffected. d. Canadian net exports decrease but Canadian GDP is unaffected. 1 University of Ottawa ECO1102 B Name________________________ Midterm # 1 (October 21, 2011) Student number________________ 7. Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are NOT measured as part of GDPAccording to most economists, why is GDP a useful measure of society's well-being? a. GDP is not a useful measure of society's well-being because it does not measure many things that society values. b. GDP is a useful measure of society's well-being because providing these other attributes is the responsibility of government. c. GDP is a useful measure of society's well-being because it measures a nation's ability to produce the things that contribute to well-being. d. GDP is an excellent measure of society's well-being because these other values cannot actually be measured. 8. Suppose that 25 years ago a country had nominal GDPof 1000, a GDP deflator of 200, and a population of 100. Today that country has a nominal GDP of 3000, a deflator of 400, and a population of 150. What happened to the real GDP per person? a. It more than doubled. b. It rose, but less than doubled. c. It fell. d. It has not changed. 9. 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, what can we conclude? a. Nominal 2006 GDP is $100, real 2006 GDP is $50,and the GDP deflator is 50. b. Nominal 2006 GDP is $100, real 2006 GDP is $50,and the GDP deflator is 200. c. Nominal 2006 GDP is $50, real 2006 GDP is $100,and the GDP deflator is 200. d. Nominal 2006 GDP is $40, real 2006 GDP is $100,and the GDP deflator is 50. 10. In 2002 dollars, real GDP per person in Canadawas about a. $25,000 in 2010. b. $30,000 in 2010. c. $35,000 in 2010. d. $40,000 in 2010. e. $45,000 in 2010. 11. Which of the following situations is described by the term “inflation”? a. The overall level of prices in the economy is increasing. b. Incomes in the economy are increasing. c. Stock-market prices are rising. d. The economy is growing rapidly. 12. What does the CPI measure? a. the overall price of inputs purchased by a typical producer b. the overall price of goods and services bought by a typical consumer c. the overall price of goods and services produced in the economy d. the overall price of stocks on the Toronto Stock Exchange 2 University of Ottawa ECO1102 B Name________________________ Midterm # 1 (October 21, 2011) Student number________________ 13. Which of the following agencies calculates the CPI? a. the National Price Board b. the Department of Weight and Measurements c. Statistics Canada d. the Ministry of Finance Use the table below to answer the following questions. Table 1 year price of pork price of corn 2010 $20 $12 2011 $25 $18 14. Refer to Table 1. Suppose that the basket of goods in the CPI consisted of 3 units of pork and 4 units of corn. What is the inflation rate for 2011? a. 21.33 percent b. 25 percent c. 28.89 percent d. 36.11 percent 15. Suppose that the CPI is currently 400 and was 100 in 1969. Then, according to the CPI, $100 today purchases the same amount of goods and services as what amount in 1969? a. $25 b. $40 c. $60 d. $400 16. Between July 2010 andAugust 2010, consumer prices in Canada increased by about a. 2.0 percent but are expected to increase because of the looming recession. b. 2.5 percent, at the same rate as the Bank of Canada’s core CPI c. 3.5 percent and were largely driven by higher prices in gasoline. d. 5.0 percent, the fastest sinceAugust 2003. 17. Suppose the price of a litre of milk rises from $1 to $1.25 and the price of a T-shirt rises from$8 to $10. If the CPI rises from 150 to 175, what will people likely buy? a. more milk and more T-shirts b. more milk and fewer T-shirts c. less milk and more T-shirts d. less milk and fewer T-shirts 18. Suppose that increases in the prices of Canadian medical care cause the CPI to increase by 2 percent, while all other prices remain the same. By how much will the GDP deflator increase? a. more than 2 percent b. 2 percent c. less than 2 percent d. There is insufficient information. The change in GDP deflator could be more, equal, or less than 2 percent. 3 University of Ottawa ECO1102 B Name________________________ Midterm # 1 (October 21, 2011) Student number________________ 19. For some racquet sports there have been increases in the size of the racquets and the methods and materials used for making them have improved. Which of the following problems in the construction of the CPI is this change in racquets most relevant to? a. substitution bias b. introduction of new goods c. unmeasured quality change d. income bias 20. Suppose that the nominal interest rate was 3 percent and the inflation rate was 1 percent. What happened with the value of savings? a. The dollar value of savings increased at 1 percent, and the value of savings measured in goods increased at 2 percent. b. The dollar value of savings increased at 2 percent, and the value of savings measured in goods increased at 3 percent. c. The dollar value of savings increased at 3 percent, and the value of savings measured in goods increased at 2 percent. d. The dollar value of savings increased at 4 percent, and the value of savings measured in goods increased at 3 percent. 21. Which of the following statements best characterizes the variations in real GDP per person and its rate of growth across countries? a. Real GDP per person differs widely across countries, but the growth rate of real GDP per person is similar across countries. b. Real GDP per person is very similar across countries, but the growth rate of real GDP per person differs widely across countries. c. Real GDP per person and the growth rate of real GDP per person are similar across countries. d. Real GDP per person and the growth rate of real GDP per person vary widely across countries. 22. Last year, real GDP in Oceania was $620 billion and the population was 2.3 million. The year before, real GDP was $502.0 billion and the population was 2.0 million. What was the approximate growth rate of real GDP per person? a. 16 percent b. 13 percent c. 10 percent d. 7 percent 23. Which of the following is a correct way to measure productivity? a. divide the number of hours worked by output b. divide output by the number of hours worked c. compute output growth d. divide the change in output by the change in number of hours worked 24. Why are Canadian workers more productive thanthe Chinese? a. because Canada is a federal state b. because Canadians have more capit
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