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Econ 1022 Macroeconomics Exam with Answers 50 questions full

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Economics 1022A/B
Sunghoon Cho

Version 555 THE UNIVERSITY OF WESTERN ONTARIO LONDON CANADA Jeannie Gillmore ECONOMICS 1022B-002/004 March 11, 2010 MIDTERM 2 MAKE-UP INSTRUCTIONS: 1. The examination begins at 4:30 p.m. and ends at 6:30 p.m. 2. Check that your examination paper contains 17 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. nde.S 5. You may use a regular calculator but you may not use a programmable or graphing calculator. 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. NOTE: QUESTIONS ARE PRINTED ON BOTH SIDES OF EACH PAGE Economics 1022B - 002/004 Mid-term 2 Make-Up March, 2010 1) The firm that printed your textbook bought the paper from XYZ Paper Mills. This purchase of paper ________ part of GDP because the paper is ________ good. A) is not; a final B) is; an intermediate C) is; a nonrenewable D) is; a final E) is not; an intermediate Use the table below to answer the following question. Table 1 Item Millions of dollars Wages paid to labour 800,000 Consumption expenditure 650,000 Taxes paid on wages 200,000 Government payments to support unemployed, sick, & aged 50,000 Firms' profits 200,000 Investment 250,000 Taxes paid on profits 50,000 Government expenditure on goods and service 200,000 Exports 250,000 Saving 200,000 Imports 300,000 2) Refer to Table 1. Consider the economy represented in the table. GDP in this economy, in millions of dollars, is A) $1,350,000. B) $1,150,000 C) $850,000. D) $1,050,000. E) none of the above. 3) When we use PPP we can make valid international comparisons of real GDP because we A) calculate the value of goods and services produced in two countries using the same quantities. B) calculate the value of goods and services produced in two countries using the same prices. C) use official government data. D) use data provided by the IMF. E) use the price data provided by the two countries but not the quantities. 1 4) In a country with a working-age population of 22 million, 16 million are employed, 2 million are unemployed, and 1 million of the employed are working part-time, half of whom wish to work full-time. The unemployment rate is A) 11.1 percent. B) 10.3 percent. C) 10 percent. D) 15.4 percent. E) none of the above. 5) When the unemployment rate ________ the natural unemployment rate, real GDP ________ potential GDP. A) is greater than; is less than B) equals; is greater than C) is greater than; equals D) is less than; is less than E) equal; is less than Use the table below to answer the following question. Table 2 Suppose a simple economy produces three goods only. The price and output data for some selected years are shown below. Price Price Quantity Quantity (dollars) (dollars) (number) (number) 1998 2008 1998 2008 Pop 0.75 1.10 100 120 Crackers 1.25 2.10 300 280 Cucumbers 2.00 3.00 200 190 6) Refer to Table 2. The reference base period is 1998. Which one of the following statements is true? A) From 1998 to 2008, the cost of the market basket rose by 58 percent. B) It costs 158 times more in 2008 than it does in 1998 to buy the same market basket. C) The inflation rate in 1998 is greater than the inflation rate in 2008. D) All prices have risen by the same amount. E) The inflation rate in 2008 is greater than the inflation rate in 1998. 7) Of the following sequences of price levels, which correctly represents a 5 percent inflation rate? A) 100, 100, 100, 100 B) 100, 105, 110, 115 C) 100, 105, 110.25, 115.76 D) 100, 105, 105, 105 E) 95, 100, 105, 110 2 8) Suppose a country's population grows by 2 percent a year and, at the same time, its real GDP grows by 5 percent a year. Real GDP per person is increasing by ________ a year. A) 2 percent B) 16 percent C) 10 percent D) 5 percent E) 3 percent 9) Between 1926 and 2007, the average growth rate of real GDP per person in Canada was ________ percent a year. During this period, ________ grew at a faster rate than ________. A) 2.1; GDP; the population B) 1.1; inflation; real GDP C) 3.1; the population; real GDP D) 2.1; real GDP; the population E) 3.1; inflation; real GDP 10) Ceteris paribus , an increase in labour productivity results in a A) higher real wage rate and higher potential GDP per hour of labour. B) lower real wage rate and lower potential GDP per hour of labour. C) constant real wage rate in the long run. D) lower real wage rate and higher potential GDP per hour of labour. E) higher real wage rate and lower potential GDP per hour of labour. 11) If the population increases, then potential GDP ________, employment ________, and potential GDP per hour of labour ________. A) increases; decreases; decreases B) decreases; decreases; decreases C) increases; increases; increases D) increases; increases; decreases E) decreases; increases; increases 12) Households will choose to save more if A) expected future income decreases. B) current disposable income increases. C) current disposable income decreases. D) both A and B are correct. E) both A and C are correct. 3 13) If China's government increases its budget surplus, there is ________ in the supply of loanable funds, private saving ________ and investment ________. A) an increase; decreases; increases B) a decrease; decreases; increases C) an increase; decreases; is crowded out D) an increase; increases; increases E) a decrease; increases; increases Refer to the table below to answer the following question. Table 3 Loanable funds Loanable funds Real demanded supplied interest rate (trillions of 2002 (trillions of 2002 (percent per year) dollars) dollars) 4 7.0 7.0 5 6.5 7.5 6 6.0 8.0 7 5.5 8.5 8 5.0 9.0 9 4.5 9.5 10 4.0 10.0 14) Refer to Table 3. The table shows an economy's demand for loanable funds schedule and the private supply of loanable funds schedule when the government's budget is balanced. If the government budget deficit is $1.0 trillion, the real interest rate is ________ percent a year, the quantity of investment is ________ trillion, and the quantity of private saving is ________ trillion. A) 3; $6.5; $7.0 B) 5; $7.5; $6.5 C) 7; $8.5; $5.5 D) 5; $6.5; $7.5 E) 7; $5.5; $8.5 4 15) Consider the following data from the economy of Adanac: · Currency outside banks: $15 billion · Personal and non-personal chequable deposits: $40 billion · Personal non-chequable deposits: $50 billion · Non-personal non-chequable deposits: $125 billion · Fixed term deposits: $200 billion What is the value of M1 and the value of M2 in this economy in billions of dollars? A) 55; 430. B) 55; 230. C) 105; 230. D) 110; 235. E) 60; 430. Use the information below to answer the following question. Fact 1 The Bank of Speedy Creek has chosen the following initial balance sheet: Assets Liabilities Reserves $40 Deposits $500 Loans $460 $500 16) Refer to Fact 1. Huck Finn comes along and deposits $10. After Huck's deposit, but before any other actions occur, the total amount of money in the economy A) has stayed the same, with currency decreasing and deposits increasing. B) has risen, with currency unchanged and deposits increasing. C) has fallen, with currency decreasing and deposits unchanged. D) has fallen, with currency decreasing and deposits staying the same. E) has stayed the same, with its components unchanged. 17) Real GDP is $2,560 billion, the price level is 125, and the velocity of circulation is 5. The quantity of money is A) $640 billion. B) $2,048 billion. C) $625 billion. D) $400 billion. E) $20.48 billion. 5 Refer to the table below to answer the following question. Table 4 Currency 2009 Exchange Rate 2010 Exchange Rate EU euro 2 euros/dollar 3 euros/dollar Japanese yen 120 yen/dollar 90 yen/dollar 18) Refer to Table 4. Between 2009 and 2010, the Canadian dollar ________ versus the euro and ________ versus the yen. A) appreciated; appreciated B) is unchanged; is unchanged C) appreciated; depreciated D) depreciated; appreciated E) depreciated; depreciated 19) Choose the correct statements about the real exchange rate. 1. The real exchange rate is a measure of how much of one money exchanges for a unit of another money. 2. The real exchange rate is the value of the Canadian dollar expressed in units of foreign currency per Canadian dollar. 3. The real exchange rate is the relative price of Canadian-produced goods and services to foreign-produced goods and services. 4. The real exchange rate is a measure of the quantity of the real GDP of other countries that we get for a unit of Canadian real GDP. A) Statements 1 and 3 are correct. B) Statements 1 and 2 are correct. C) Statements 2 and 3 are correct. D) Statements 3 and 4 are correct. E) Statements 2 and 4 are correct. 20) The higher the exchange rate, all other things remaining the same, the A) smaller is the supply of Canadian imports. B) greater is the volume of Canadian imports. C) greater is the supply of Canadian imports. D) smaller is the volume of Canadian imports. E) greater is the demand for Canadian exports. 6 21) Suppose that a U.S. dollar can earn interest of 5 percent a year in Chicago and a Canadian dollar can earn interest of 7 percent a year in Winnipeg. Will money flow from Chicago to Winnipeg? A) No, because the outflow of U.S. funds would create a decrease in the U.S. dollar value, penalizing investors when they attempted to recover their funds. B) No, if investors expect that the Canadian dollar will appreciate by at least 2 percent per year. C) No, as long as the U.S. dollar maintains higher purchasing power than the Canadian dollar. D) No, if investors expect the U.S. dollar to appreciate by at least 2 percent per year. E) Yes, because the returns on money are higher in Winnipeg. 22) Suppose that the following situation exists in the foreign exchange market. 1 Canadian dollar buys 5.77 South African rand. If the price of a bottle of South African wine is 32 rand, what is the price in Canadian dollars if purchase power parity exists? A) $184.64 B) $18.02 C) $5.55 D) $18.46 E) $32.00 Use the information below to answer the following question. Fact 2 You are given the following information about the country of Ecoland, whose currency is the turkey, and whose official settlements balance is zero. Variable Billions of turkies Real GDP 50 Consumption expenditure 30
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