ECMA06 – Introduction to Macroeconomics: A Mathematical Approach
Midterm, Winter 2012
Date & Time: Saturday, March 3, 2012, 9:00am – 10:30am
Instructor: Iris Au
Aids Allowed: Non-programmable calculator
Time Allowed: 90 minutes
Total number of pages (including the cover page): 10
Total Points: 100
Instructions – please read carefully
1) On the scantron answer sheet, you must:
PRINT your family name and first name.
Enter your student number as the identification number.
FILL IN THE BUBBLES under you name and student number.
FILL IN THE BUBBLES ASSOCIATED WITH YOUR TEST VERSION (THIS
IS VERSION A).
2) If you fail to carry our all tasks indicated in part 1, 4 marks will be deducted from
your final score.
3) There are 25 multiple-choice questions (and a 26 question which will confirm your
exam version). For each question, choose the correct answer. If two multiple choice
answers both seem to be approximately correct, choose the best of the two answers.
Put your answers on the scantron sheet provided by filling in the appropriate
bubble. If answers are not written on the scantron sheet, there will be no marks
given for answers. Each correct answer is worth 4 marks (except for Question 26,
where the correct answer simply confirms your exam version); incorrect answers
receive 0 mark (there is no deduction for wrong answers).
ECMA06 Midterm Version A – Winter 2012 Page 1 of 10 5) When entering your answers on the scantron sheet:
Use a medium (HB) pencil.
Fill in the bubble neatly and completely.
Erase any changes as completely as possible.
Be very careful to place each answer in the correct place.
6) This midterm consists of 25 questions (plus a 26 identifier question). Answer each
question by choosing the best alternative and indicating your choice in the appropriate
place on the scantron sheet provided with this exam (the scantron sheet is the only
thing you will turn in at the end of the exam).
7) You may take the rest of the exam away with you, so you can use the front and back
of these pages for your rough work. If you wish to keep a record of your answers,
make a note of them on the exam.
8) The scantron sheet will not be returned to you, but correct answers will be posted, and
your grade will be posted on the Intranet.
9) Questions related to the content of the exam will NOT be answered.
ECMA06 Midterm Version A – Winter 2012 Page 2 of 10 Question 1 – Question 2: The economy in question is a closed economy. It produces and consumes
three goods only. The following table summarizes the prices and production of these goods in 2010 and
2011. The government chooses 2010 as the base year.
Goods Price Quantity produced Price Quantity produced
1 $4 30 $4 20
2 $6 12 $5 12
3 $10 20 $8 25
The consumption of good 1 is equally split between households and firms.
Households purchase all good 2.
Households purchase 60% of good 3, firms purchase 25% of them, and the government
purchases the remaining good 3.
Compute the consumer price index in 2011 (rounded to 2 decimal places).
A) 118.24 B) 117.50 C) 116.67 D) 114.56 E) 100.00
F) 92.86 G) 87.29 H) 85.71 I) 85.10 J) 84.58
What is the GDP deflator in 2011 (rounded to 2 decimal places)?
A) 68.31 B) 84.58 C) 85.05 D) 85.71 E) 92.29
F) 100.00 G) 116.67 H) 117.58 I) 118.24 J) 146.40
Which of the following transaction(s) would affect consumption?
A) A family buys a used car.
B) A family buys a new house.
C) A family buys a new refrigerator.
D) A & B.
E) A & C.
F) B & C.
G) A, B, & C.
H) None of the above.
ECMA06 Midterm Version A – Winter 2012 Page 3 of 10 Question 4
Suppose you are given the following list of items from a country’s national accounts:
I) Wages and salaries.
II) Consumptions goods and services sold to consumers.
III) Investment goods acquired by firms.
IV) Government spending on goods and services.
V) Government transfer payments to households and firms.
VI) Capital consumption goods allowance.
Which of the above item(s) would not be included if you were adding up entries to obtain a measure of
gross domestic product using the expenditure approach?
A) Only I B) Only V C) Only VI D) I & IV E) I & V
F) I & VI G) III & VI H) V & VI I) I, III, & VI J) I, V, & VI
Question 5 – Question 6: An economy consists of only two firms, A and B. There is no government
and no foreign sector. Firm A produces $3000 worth of output, while firm B produces $4000 worth of
output. Firm A sells $1500 worth of output to consumers, $900 worth of output to firm B for immediate
use in production, and another $600 worth of output to firm B to be used as investment goods. Firm B
sells $2000 worth of output to consumers, $700 worth of output to firm A for immediate use in
production, and another $1200 worth of output to firm A to be used as investment goods. Firm B has
$100 worth of output which it cannot sell, and which is added to its inventories.
Find the value of final product.
A) $3500 B) $3600 C) $4100 D) $4200 E) $4800
F) $5100 G) $5200 H) $5300 I) $5400 J) $7000
What is the level of investment in this economy?
A) $600 B) $700 C) $900 D) $1200 E) $1500
F) $1600 G) $1800 H) $1900 I) $3400 J) $3500
ECMA06 Midterm Version A – Winter 2012 Page 4 of 10 Question 7 – Question 8: The economy in question has an adult population of 26900 and the size of
the population does not change. Initially, the pool of people who are not in the labour force is 5200;
17045 people have full-time jobs and 2125 people have part-time jobs; and the remaining 2530 are
Based on the information given, in the initial period, this economy would have (rounded to 1 decimal
A) An unemployment rate of 11.7% and an employment rate of 71.3%.
B) An unemployment rate of 11.7% and an employment rate of 88.3%.
C) An unemployment rate of 11.7% and an employment rate of 63.4%.
D) An unemployment rate of 12.9% and an employment rate of 71.3%.
E) An unemployment rate of 12.9% and an employment rate of 63.4%.
F) An unemployment rate of 12.9% and an employment rate of 87.1%.
G) An unemployment rate of 13.0% and an employment rate of 71.3%.
H) An unemployment rate of 13.0% and an employment rate of 87.0%.
I) An unemployment rate of 9.4% and an employment rate of 63.4%.
J) An unemployment rate of 9.4% and an employment rate of 90.6%.
In a later period, the economy experiences an adverse (unfavourable) shock such that the number of full-
time jobs falls by 283, while the number of part-time jobs increases by 218. At the same time, the total
number of unemployed workers falls by 97. In the later period, the unemployment rate is (rounded to 2
A) 10.75% B) 11.23% C) 11.30% D) 12.02% E) 12.09%
F) 12.11% G) 12.20% H) 12.68% I) 13.97% J) 14.07%
The consumer price index (CPI) in 1985 and 2011 were 77.4 and 124.3 respectively (setting the index to
100 in 2002). The average annual inflation rate in the 26 years between 1985 and 2011 was (rounded to
2 decimal places):
A) 0.87% B) 0.93% C) 1.45% D) 1.80% E) 1.81%
F) 1.84% G) 2.06% H) 2.29% I) 2.33% J) 3.09%
The consumer price index (CPI) in 1980 was 49.5 while the CPI in 1992 was 78.9. Hayden earned
$20760 in 1992, and his father, Tom, earned $13400 in 1980. What is Hayden’s income measured in
1980 dollar (rounded to nearest dollar)?
A) $8406 B) $19175 C) $21359 D) $13024 E) $12984
F) $13400 G) $33090 H) $19934 I) $14063 J) $20760
ECMA06 Midterm Version A – Winter 2012 Page 5 of 10 Question 11 – Question 13: The economy in question is a closed economy (i.e., no foreign sector).
Interest rate, r, is held constant at 0.04 (4%) and prices are held fixed. The economy can be described by
the following equations.
Consumption: C = 395 + 0.75DI; where DI = disposable income