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ECON 1010 Study Guide - Midterm Guide: Marginal Cost, Canadian Dollar, Demand CurveExam


Department
Economics
Course Code
ECON 1010
Professor
All
Study Guide
Midterm

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Exam
Name___________________________________
Econ 1010 O, T -- MID TERM TEST Winter 2014-- Version 3
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1)
If aggregate planned expenditure exceeds real GDP, then inventories
1)
A)
remain constant and real GDP remains constant.
B)
decrease and real GDP decreases.
C)
decrease and real GDP increases.
D)
increase and real GDP increases.
E)
increase and real GDP falls.
Use the table below to answer the following question.
Table 27.1.1
The following table shows the relationship between consumption
expenditure (C) and disposable income (YD) for a hypothetical economy.
YD (dollars) C(dollars)
100
200
300
400
500
600
225
300
375
450
525
600
2)
Refer to Table 27.1.1. If YD is $400, then saving is
2)
A)
-$50.
B)
$50.
C)
$100.
D)
-$125.
E)
zero.
3)
Real GDP ________.
3)
A)
grows at a constant 3 percent per year
B)
fluctuates around potential GDP
C)
equals potential GDP in the base year
D)
equals potential GDP when the price level is constant
E)
fluctuates from year to year but is always below potential GDP
4)
A decrease in the marginal propensity to import ________, everything else remaining the same.
4)
A)
sometimes increases the multiplier and sometimes decreases the multiplier
B)
makes the multiplier smaller
C)
increases the marginal propensity to consume
D)
has no effect on the multiplier
E)
makes the multiplier larger
1

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5)
The creation of a successful movie illustrates choices made in self-interest that also achieve the
social interest if ________.
5)
A)
the movie is produced in a country where workers typically earn less than workers in North
America
B)
the movie is an Academy award winner because an Academy award winning movie is most
popular with the movie-going public
C)
the movie is produced at the lowest possible cost, and the movie gives the greatest possible
benefit
D)
the movie has a higher attendance than any other movie produced that year
E)
the movie addresses a social issue
6)
In a recent study, the University of Underfunded argued that it created four times as many jobs as
people that it hired directly. This argument illustrates the idea
6)
A)
of the tax multiplier.
B)
of the marginal propensity to consume.
C)
that universities are wasting taxpayers' dollars.
D)
of the multiplier.
E)
of government spending.
7)
For the aggregate economy, income equals
7)
A)
expenditure equals GDP.
B)
GDP, but expenditure is generally less than these.
C)
expenditure equals GDP only if there is no government or foreign sectors.
D)
expenditure, but these are not generally equal to GDP.
E)
expenditure equals GDP only if there is no depreciation.
8)
Which one, if any, of the following events shift the short-run aggregate supply curve but not the
long-run aggregate supply curve?
8)
A)
A change in factor prices.
B)
An advance in technology.
C)
A change in the quantity of capital.
D)
An increase in the full-employment quantity of labour.
E)
None of the above.
9)
To derive net domestic income at market prices from gross domestic product, we
9)
A)
subtract the statistical discrepancy from GDP.
B)
subtract depreciation from GDP.
C)
add the statistical discrepancy to GDP.
D)
add depreciation to GDP.
E)
subtract gross investment from GDP.
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Use the figure below to answer the following questions.
Figure 26.3.1
10)
Refer to Figure 26.3.1. Econoworld is at its short-run macroeconomic equilibrium. There is a
difference between ________ real GDP and potential GDP of $________ billion.
10)
A)
below full-employment equilibrium; 40
B)
below full-employment equilibrium; 20
C)
above full-employment equilibrium; 20
D)
full-employment equilibrium; 0
E)
above full-employment equilibrium; 40
11)
Refer to Figure 26.3.1. Consider statements (1) and (2) and select the correct answer.
(1) The actual unemployment rate exceeds the natural unemployment rate.
(2) Short-run aggregate supply will automatically shift leftward as the economy adjusts to
long-run equilibrium.
11)
A)
(1) is true; (2) is true if the money wage rate falls.
B)
(2) is true; (1) is false.
C)
(1) and (2) are true.
D)
(1) is true; (2) is false.
E)
(1) and (2) are false.
12)
The purchase of a new home is categorized as ________.
12)
A)
investment only if the home owners take out a mortgage
B)
consumption expenditure
C)
investment
D)
consumption expenditure only if the home owners do not take out a mortgage
E)
consumption expenditure and investment
3
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