econ1022B-2011-mt1-1.pdf

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

Description
V111 THE UNIVERSITY OF WESTERN ONTARIO LONDON CANADA E. Rivers ECONOMICS 1022B-001 February 5, 2011 MIDTERM #1 INSTRUCTIONS: 1. The examination begins at 1:00 p.m. and ends at 3:00 p.m. 2. Check that your examination contains 14 pages. 3. Use a BLACK PENCIL to complete your Scantron Form. i. Print your NAME and complete your SIGNATURE ii. Enter your STUDENT NUMBER iii. Enter your SECTION NUMBER – 001 iv. Ensure that the VERSION CODE on your question packet matches the version code on your Scantron Form. In order to get credit for a question, you must record the correct answer on your Scantron Form. No credit will be given for answers recorded in your question packet. 4. You may have pencils, erasers, your student card, and a non-programmable calculator at your desk. All other items must be left in your bag at the front of the examination room. 5. Please ensure that all electronic devices (cell phones, laptops, etc.) are turned off before storing them in your bag at the front of the examination room. 6. There are no washroom breaks allowed during the test. 7. Out of fairness to all students, the proctors cannot answer questions about the exam. If you believe that there is an error in a question, please make a note of the question number and convey your concerns to Ms. Rivers in writing after the exam. 8. WHEN FINISHED, PLEASE HAND IN ALL EXAM MATERIALS. Please print your name at the top of this question packet. Question packets will be made available after the examinations have been graded. V111 V111 MULTIPLE CHOICE. Choose the one alternative that best completes the sta tement or answers the question. 1) Gross domestic product is A) the market value of all the intermediate goods and services produced in a country during a given time period. B) the final value of all goods produced in a country in a given time perio d. C) the market value of all goods and services produced in a country during a given time period. D) the average value of output produced in a country in a given time period . E) the market value of all the final goods and services produced in a count ry during a given time period. 2) In the circular flow model, A) firms are sellers of goods and services in goods markets. B) households are buyers of goods and services in the factor markets. C) firms are buyers of goods and services in final markets. D) households are sellers of factor services in goods markets. E) firms are sellers of the factors in factor markets. 3) Suppose the economy's capital increases over the year. It must be true t hat A) depreciation was greater than net investment. B) depreciation is less than zero. C) net investment was positive. D) net investment was greater than gross investment. E) depreciation was greater than gross investment. 4) Which of the following would be an example of a consumption expenditure? A) An increase in welfare payments to single mothers. B) The purchase of a new car by the Singh household. C) More spending by the government on children's programs. D) The purchase of a new car by the IPSCO steel company. E) All of the above. 5) A hypothetical economy produced four final goods during the year: plates , TVs, bicycles, and computers. Forty plates were produced and sold for $10 each. Five TVs we re produced and sold for $300 each. Fifty bicycles were produced and sold for $100 each. Thre e computers were produced and sold for $750 each. With this information, one could determ ine A) gross investment for this economy. B) net investment for this economy. C) whether factors had been fully employed in this economy. D) total income for this economy. E) indirect taxes less subsidies for this economy. A-1 V111 6) Suppose the economy of Econoworld produces only two goods, kayaks and bi rdseed. In one year 20 kayaks are produced and sold for $1,000 each and 10 bags of birdseed are produced and sold for $30 each. The value of nominal GDP for this year is A) $20,300. B) $300. C) $23,000. D) $20,000. E) 20 kayaks plus 10 bags of birdseed. Use the table below to answer the following question. Table 1 Data From Eastland Wages, salaries, and supplementary labour income 800 Farmers' income 80 Government expenditures on goods and services 240 Depreciation 240 Business investment 400 Personal income taxes net of transfer payments 140 Corporate profits 80 Indirect taxes 120 Net exports 80 Consumption expenditure 640 Interest and miscellaneous investment income 100 7) Refer to Table 1. From the information given in the table, the value of net domestic income at market prices is A) $1,290. B) $1,280. C) $1,360. D) $1,120. E) $1,100. 8) Suppose in current dollar (nominal) terms, GDP increased by approximat ely 7 percent between one period and the next, but real GDP fell by 2 percent. Which one of th e following explanations is most likely? A) Prices fell by 2 percent. B) Prices fell by 9 percent. C) Prices increased by 9 percent. D) Prices increased by 7 percent. E) Output rose by 2 percent. A-2 V111 9) Which of the following ista reason for GDP incorrectly measuring the value of total output? A) Leisure time. B) Underground economic activity. C) Household production. D) Environmental quality. E) Depreciation. 10) In any year, real GDP A) must always be less than potential GDP. B) always equals potential GDP. C) might be greater or less than potential GDP. D) increases if potential GDP increases, and decreases if potential GDP dec reases. E) will always be greater than potential GDP because of the tendency of nat ions to incur inflation. Use the figure below to answer the following question. Figure 1 11) Refer to Figure 1. In the figure, a recession begins at point ________ a nd an expansion begins at point ________. A) ; A B) ; C C) C; D D) ; B E) ; C A-3 V111 Use the table below to answer the following questions. Table 2 2008 2009 Item Quantity 2008 Price Quantity 2009 Price CD players 10 $100 15 $120 bananas 50 bunches $3 100 bunches $4 12) Refer to Table 2. In this table, at 2009 prices, the value of production from 2008 to 2009 has increased by A) 36.4 percent. B) 57.1 percent. C) 56.5 percent. D) 47.7 percent. E) 91.7 percent. 13) Refer to Table 2. Calculating chained-dollar real GDP, real GDP in 2009 increased by A) 56.8 percent. B) 57.1 percent. C) 56.5 percent. D) 40.0 percent. E) 75.0 percent. 14) Which one of the following people would be counted as unemployed in Cana da? A) a person who has been laid off for 10 weeks and is not looking for a job because he is waiting to be called back to his old job B) a person who has been seeking a job for the last six months, but gave up looking because he was discouraged by his job prospects C) a person who will be starting a new job in 6 months D) a person who expects to be laid off by the end of the month before next month's survey can be completed E) a part-time worker who repeatedly expresses a desire to become a full-ti me worker 15) The unemployment rate is defined as the number of A) unemployed people divided by the number of people in the country who are employed. B) unemployed people divided by the number of employed people. C) unemployed people divided by the sum of the people employed and the peop le unemployed. D) unemployed people divided by the number of people in the country. E) employed people divided by the number of people in the country. A-4 V111 16) 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 employment-to-population ratio is A) 75.5 percent. B) 65 percent. C) 72.7 percent. D) 57.5 percent. E) none of the above. 17) Which of the following pieces of information do you need to calculate th e labor force participation rate? I. the number of employed persons II. the number of unemployed persons III. the population IV.the working age population A) I, II and IV B) I and II C) I and III D) I, II and III E) all of the above 18) 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. If 500,000 of those unemployed are cyclically unemployed, wha t is the natural unemployment rate? A) 5.6 percent B) 9.4 percent C) 11.1 percent D) 8.3 percent E) none of the above 19) If the economy is operating at full employment, then A) the unemployment rate is zero. B) the unemployment rate is approximately 3 percent. C) the entire labour force is employed. D) everyone who wants a job has one. E) none of the above. 20) Structural unemployment arises in part because A) of unrealistic wage expectations. B) there are not enough jobs available. C) people become discouraged when they cannot find jobs. D) of technological change. E) people will not quit their present jobs until they can find suitable emp loyment elsewhere. A-5 V111 21) Suppose that the unemployment rate equals 4.5 percent and that the natur al unemployment rate is 5.5 percent. We can conclude that A) potential GDP is less than real GDP. B) potential GDP is greater than real GDP. C) we have mismeasured the natural unemployment rate. D) real GDP is greater than nominal GDP. E) potential GDP equals real GDP. 22) If the CPI was 95 at the end of 2007 and 105 at the end of 2008, what wa s the inflation rate in 2008? A) 10.5 percent B) 5 percent C) 105 percent D) 9.5 percent E) 10 percent Use the table below to answer the following question. Table 3 Suppose a simple economy produces three goods only. The price and output data for some s
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