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Western macroeconomics exam febuary 2011-1.pdf

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Department
Economics
Course
Economics 1022A/B
Professor
Jeannie Gillmore
Semester
Fall

Description
Version 333 THE UNIVERSITY OF WESTERN ONTARIO LONDON CANADA Jeannie Gillmore ECONOMICS 1022B-002/004 February 5, 2011 MIDTERM 1 INSTRUCTIONS: 1. The examination begins at 4:00 p.m. and ends at 6:00 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. mrcdel 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. 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 Economics 1022B - 002/004 Mid-term 1 February 5, 2011 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the figure below to answer the following question. Figure 1 1) Refer to Figure 1, which shows the circular flow of expenditure and income for Venus. During 2008, A was $100, B was $50,C was $30 and D was $10. How much is aggregate expenditure? A) $90. B) $50. C) $100. D) $75. E) None of the above. 2) In calculating GDP, all of the following are excludedt A) the value of all homes built in the year in question. B) subsidies from the government. C) the value of intermediate goods. D) the value of used goods. E) purchases of stocks and bonds. C-1 3) How much would the production of a kayak add to GDP if the shell costs $250, the paint costs $20, the finisher costs $35, the manufacturer sold it to the dealer for $500, and the dealer sold it to his customer for $800? A) $305. B) $800. C) $1,300. D) $500. E) $1,605. 4) Which of the following statements is true? A) Final goods and services produced in Canada by foreigners are part of Canada's GDP. B) Final goods and services produced in Canada by foreigners are exports. C) Final goods and services produced in Canada by foreigners are part of the foreign country's GDP. D) Final goods and services produced in Canada by foreigners are imports. E) Final goods and services produced abroad by Canadians are part of Canadian GDP. Use the table below to answer the following question. Table 1 Government expenditures on goods and services $ 500 Wages, salaries, and supplementary labour income 2,000 Depreciation 400 Investment 400 Consumption expenditure 2,200 Net exports -50 Indirect taxes 150 Statistical discrepancy 0 5) Refer to Table 1. Gross domestic product equals A) $3,050. B) $3,400. C) $5,600. D) $3,150. E) $5,050. C-2 6) The income approach to measuring GDP is derived by adding together A) wages, salaries and supplementary labour income, corporate profits, interest and miscellaneous investment income, farmers' income, subsidies paid by the government, indirect taxes paid, and income of non-farm unincorporated businesses. B) wages, salaries and supplementary labour income, corporate profits, interest and miscellaneous investment income, farmers' income, and income of non-farm unincorporated businesses, plus indirect taxes less subsidies, plus depreciation. C) the value added of each firm in the economy, indirect business taxes, depreciation, and by subtracting subsidies paid by the government. D) the value added of each firm in the economy. E) the total expenditures of consumers, investors, net exporters, and purchases of all levels of government. 7) Real GDP equals A) the value of final goods and services produced in a given year when valued at the prices of a reference base year. B) nominal GDP adjusted for the depreciation of capital. C) nominal GDP minus the value of goods exported to foreign countries. D) nominal GDP minus the rate of inflation. E) nominal GDP minus the value of intermediate goods. Use the table below to answer the following question. Table 2 There are only two goods in this economy. Price Quantity Base Year Current Year (dollars) (dollars) Base Year Current Year Bread 1.00 2.10 70,000 75,000 Computer Disks 1.00 1.80 25,000 18,000 8) Refer to Table 2. Consider the data in this table. What is current real GDP in terms of base-year prices? A) $93,000. B) $95,000. C) $189,900. D) $192,000. E) None of the above. C-3 9) Suppose Angela falls in love with and subsequently marries her regularly employed housekeeper, Tony. What effect would this action have on GDP? A) It depends on whether he starts to work in the house free of charge or whether she still pays him. B) It would rise. C) It would fall. D) It would stay the same. E) It would fall but then increase after the honeymoon was over. 10) All of the following statements are trueexcept A) real GDP per person was $23,230 per year lower in 2008 than it would have been with no growth slowdown. B) the Lucas wedge is the dollar value of the accumulated gap between what real GDP per person would have been if the 1960s growth rate had persisted and what real GDP per person turned out to be. C) the Lucas wedge accumulated to $316,000 per person by 2007. D) the Lucas wedge arises from the slowdown of productivity growth that began during the 1970s. E) the Lucas wedge equals real GDP minus potential GDP. C-4 Use the table below to answer the following question. Table 3 In 2007 Item Quantity Price Cell phones 2 $1 each Pens 9 $1 each Pizza 4 $1 each In 2008 Item Quantity Price Cell phones 8 $7 each Pens 4 $6 each PizzaWatches 9 $5 each 11) Refer to Table 3. An economy produces only cell phones, pens, and pizza. The table gives the quantities produced and prices in 2007 and 2008. The base year is 2007. The chained-dollar real GDP in 2008 is A) $19. B) $13. C) $21. D) $88. E) $125. 12) In a country with a working-age population of 20 million, 13 million are employed, 1.5 million are unemployed, and 1 million of the employed are working part-time, half of whom wish to work full-time. The labour force participation rate is A) 65 percent. B) 72.5 percent. C) 75.5 percent. D) 57.5 percent. E) none of the above. 13) In a country with a working-age population of 30 million, 18 million are employed, 2 million are unemployed, and 2 million of the employed are working part-time, half of whom wish to work full-time. The involuntary part-time rate is A) 5 percent. B) 4.5 percent. C) 4.8 percent. D) 10 percent. E) none of the above. C-5 14) Unemployment caused by permanently decreased demand for horse-drawn carriages is an example of A) seasonal unemployment. B) structural unemployment. C) cyclical unemployment. D) frictional unemployment. E) discouraged unemployment. 15) In a country with a working-age population of 30 million, 18 million are employed, 2 million are unemployed, and 2 million of the employed are working part-time, half of whom wish to work full-time. If 1 million of those unemployed are cyclically unemployed, what is the natural unemployment rate? A) 6.7 percent B) 11.1 percent C) 5 percent D) 5.6 percent E) none of the above 16) Rochelle lost her job as a salesperson when sales fell off during the recession. Now she is looking for a new job. Rochelle is A) structurally unemployed. B) frictionally unemployed. C) cyclically unemployed. D) not unemployed. E) none of the above. 17) When the unemployment rate is less than the natural unemployment rate, real GDP is ________ than potential GDP and the output gap is ________. A) smaller; positive B) greater; positive C) greater; equal to zero D) smaller; negative E) greater; negative 18) The fixed basket of Econoland consists of 10 units of , 20 units of , and 30 units of . Current prices are $1 per unit of , $2 per unit of , and $3 per unit of . Base year prices are $1 for each unit of , , and . What is the CPI in the current year? A) 233 B) 430 C) 100 D) 43 E) 140 C-6 19) Of the following sequences of price levels, which correctly represents a 5 percent inflation rate? A) 100, 105, 110, 115 B) 100, 105, 110.25, 115.76 C) 100, 100, 100, 100 D) 100, 105, 105, 105 E) 95, 100, 105, 110 20) 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) 5 percent B) 10 percent C) 3 percent D) 2 percent E) 16 percent 21) Real GDP per person in the country of Flip is $10,000, and the growth rate is 10 percent a year. Real GDP per person in the country of Flap is $20,000 and the growth rate is 5 percent a year. When will real GDP per person be greater in Flip than in Flap? A) in 2 years B) never C) in 15 years D) in 7 years E) in 10 years 22) 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) 1.1; inflation; real GDP B) 2.1; GDP; the population C) 3.1; the population; real GDP D) 2.1; real GDP; the population E) 3.1; inflation; real GDP 23) 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) remained constant; equal C) increased; faster D) decreased; faster E) reversed; slower C-7 Use the figure below to answer the following question. Figure 2 24) Refer to Figure 2. The country of Kemper is on its aggregate production funcin thet point above figure. If the population increases with no change in capital or technology, the economy will A) either remain at poinor move to point . B) move to point such as . C) move to point such as . D) move to point such as . E) remain at poin. C-8 Use the table below to answer the following question. Table 4 Quantity of Quantity of Real wage rate labour demanded labour supplied (2002 dollars per hour) (billions of hours (billions of hours per year) per year) 15 70 10 20 60 20 25 50 30 30 40 40 35 30 50 Real GDP Quantity of (trillions of 2002labour (billions dollars per year) of hours per year) 3 20 9 30 14 40 18 50 21 60 25) Refer to Table 4. The tables show the labour market and the aggregate production function schedule for the country of Pickett.
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