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Midterm

Economics 1021A/B Study Guide - Midterm Guide: Government Budget Balance, Core Inflation, Real Interest Rate


Department
Economics
Course Code
ECON 1021A/B
Professor
Jeannie Gillmore
Study Guide
Midterm

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Version 111
ECONOMICS 1022B-002/004
Department of Economics
Western University
Jeannie Gillmore MIDTERM 2 March 15, 2014
INSTRUCTIONS:
1. The examination begins at 4:00 p.m. and ends at 6:00 p.m.
2. Check that your examination paper contains 19 pages.
3. Use a BLACK PENCIL to complete your Scantron Form.
Print your NAME and complete your SIGNATURE.
Enter your STUDENT NUMBER.
Enter your SECTION NUMBER, which is either 002 or 004.
4. Please hand in Scantron Form only.
5. You may use a calculator but your cell phone may not be used as a calculator.
6. Your cell phone must be switched off and left in your bag at the front of the exam room.
7. You must remain in the examination room until you have finished the exam. No breaks
outside of the examination room will be allowed.
NOTE: QUESTIONS ARE PRINTED ON BOTH SIDES OF EACH PAGE

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Economics 1022B-002/004 Mid-term 2
March, 15, 2014
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) The largest component of GDP using the expenditure approach is
A) investment
B) exports
C) imports
D) consumption expenditure
E) government expenditure
2) Net domestic income at market prices can be derived by which one of the following? GDP
(income approach) minus
A) consumption expenditure.
B) subsidies.
C) depreciation.
D) corporate profits.
E) taxes.
Use the table below to answer the following question.
Table 1
Quantities 2011 2012
Bananas 1,000 bunches 1,100 bunches
Coconuts 500 bunches 525 bunches
Prices 2011 2012
Bananas $2 a bunch $3 a bunch
Coconuts $10 a bunch $8 a bunch
3) Refer to Table 1. The table provides data on the economy of Tropical Republic that produces only
bananas and coconuts.
Nominal GDP in 2011 is ________. Nominal GDP in 2012 is ________. The chained-dollar real
GDP in 2012 expressed in 2011 dollars is ________.
A) $7,000; $7,500; $7,472.50
B) $7,500; $7,000; $7,472.50
C) $1,500; $1,625; $1,575
D) $7,472.50; $7,500; $7,000
E) $7,472.50; $7,000; $7,500
A-1

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4) Which of the following is not included in the working-age population?
A) discouraged workers
B) involuntary part-time workers
C) students over the age of 15
D) retired workers
E) All of the above are included in the working-age population.
5) Suppose that the natural unemployment rate is 4.5 percent and the actual unemployment rate is 3.5
percent. Then cyclical unemployment is
A) -1 percent.
B) 1 percent.
C) 0 percent.
D) 8 percent.
E) 3.5 percent.
6) If there is a 5 percent increase in the CPI, then there will most likely be
A) a less than 5 percent rise in the cost of living because of consumers substituting away from
goods whose relative prices rise towards other goods.
B) a less than 5 percent rise in the cost of living because of falling quality of goods over time.
C) a 5 percent rise in the cost of living.
D) a more than 5 percent rise in the cost of living because of consumers substituting away from
goods whose relative prices rise towards other goods.
E) a more than 5 percent rise in the cost of living because of the introduction of new goods.
7) Comparing the core inflation rate to the Consumer Price Index, the core inflation rate
A) excludes the volatile elements of the CPI.
B) includes volatile elements not in the CPI.
C) uses current period quantities, not base period quantities.
D) measures all goods produced, not just consumer goods.
E) controls for the biases of the CPI.
8) The gap between real GDP per person in Canada and Hong Kong has ________ since 1960.
During this period, the growth rate of real GDP per person in Canada has been ________ than in
Hong Kong.
A) reversed; faster
B) increased; faster
C) decreased; faster
D) remained constant; equal
E) reversed; slower
A-2
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