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Econ 2150 Exam for Deb

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Department
Economics
Course
Economics 2150A/B
Professor
Leigh Mac Donald
Semester
Fall

Description
1 Economics152b-003 Solutions to Midterm 1, February 2007 Version 222 Version 333 Version 444 Version 555 1. C B A A 2. D C B B 3. B E D and E* B 4. B C C E 5. A A A E 6. B B B E 7. C D and E* B E 8. E C E E 9. C A E E 10. A B E D 11. B B E E 12. D and E* E E B 13. C E E C 14. A E D D 15. B E E B 16. B E B B 17. E E C A 18. E D D B 19. E E B C 20. E B B E 21. E C A C 22. E D B A 23. D B C B 24. E B E D and E* 25. B A C C Version 222 #8, Version 333 #3, Version 444 #23, Version 555 #20 The only item that is included in the calculation of GDP is the amount paid to workers of $2 million. The others are just transfers of cash between the government and individuals. They do not reflect production activity so they are not included. Version 222 # 12, Version 333 #7, Version 444 #3, Version 555 #24 Technically the correct answer is “d”, which looks at the conditions for Pareto optimality. Since in most situations (however, not all) competitive equilibrae also are pareto optimal, then “e” would be correct. 2 Version 222 #17, Version 333 #12, Version 444 #8, Version 555 #4 Growth rate = (1200 – 1500) / 1500 X 100 = - 20% Version 222 #24, Version 333 #19, Version 444 #15, Version 555 #11 S= I + NX + NFP rec’d = 200,000 + (130,000 – 120,000) + (15,000 – 20,000) = 200,000 + 10,000 – 5,000 = 205,000 Problems GDP DEFLATOR/CPI QUESTION Version 222 #1-4, Version 333 #4-7, Version 444 #3-6, Version 555 #11-14 1. GDP Deflator in the base year is always 100 2. Real GDP using the base year price method = Σ (base year prices(2004) x 2005 Qs) = (1.5 x 8200) + (3 x 10500) + (2 x 9000) = 61800 3. GDP Deflator using the chain-weighted index method… Note: the following is the method in your lecture notes and the method we did in class during the 2 in class examples. As stated in class, this is the method I expect you to use on the exam. Compare Q an1 Q usi2g 2005 Ps. Real GDP in 2005 = nominal GDP in 2005 = 2005P x 2005 Q = 1.5 x 8000 + 3 x 10000 + 2 x 9000 = 60000 %Δ from 2005 to 2006 using 2005 Ps = 61800- 60000 x 100 60000 3% = This part is worth 1 mark. 3 Compare Q an1 Q usi2g 2006 Ps. 2005 Q x 2006 P = (2 x 8000) + (2.5 x 10000) + ( 2.5 x 9000) = 63500 2006 Q x 2006 P = 2 x 8200 + 2.5 x 10500 + 2.5 x 9000 = 65150 %Δ from 2005 to 2006 using 2006
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