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Midterm

ECON 1010 Study Guide - Midterm Guide: Purchasing Power Parity, Potential Output, Capital AccountExam


Department
Economics
Course Code
ECON 1010
Professor
All
Study Guide
Midterm

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YORK UNIVERSITY
Department of Economics
LAPS/ECON 1010 P, Q Introduction to Macroeconomics
March 11, 2010 Professor A. Cohen
TERM TEST #2
INSTRUCTIONS:
1. PRINT your name: ________________________ _________________
(Last Name) (First Name)
2. Student Number: _____________________________
3. WebCT / PassportYork User ID: _____________________________
4. Signature: _____________________________
On the top of the pink computerized answer sheet, use an HB pencil to:
5. Print your full name on the horizontal line provided.
6. Print your student number in the vertical space provided and fill in the corresponding
rectangles for each digit.
7. The test has 2 parts. Answers to Part I (Multiple Choice Questions) must be entered on the pink
computerized answer sheet. Use only an HB pencil. The answer sheet will not be returned;
the rest of the test paper will be returned. Answers to Part II (Problems) must be entered on the
problem pages. Where required, you must show your calculations to receive credit.
Problem answers can be done in pen or pencil, but pencil answers cannot be appealed.
8. The test is 50 minutes, 90 marks. Insert (do NOT bend or fold) the pink computerized answer
sheet in the middle of the test paper when you are finished.
9. NO CALCULATORS, DIGITIAL DICTIONARIES, CELL PHONES OR ANY
ELECTRONIC DEVICES ALLOWED.
DO NOT WRITE IN THIS SPACE
M.C. x 4 =
Problems =
Total =
/ 90

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AS/ECON1010 P, Q 2 Term Test #2, 2010
PART I Multiple Choice Questions (64 marks, 35 minutes)
For each question pick the one best answer. Each right answer is worth 4 marks,
each wrong answer zero (16 questions (plus version), about 2 minutes per question).
1. This is Version B of the test. For question 1 on the pink answer sheet, fill in answer rectangle B.
2. Currently the country of Lucyllia has a budget plan with constant government outlays
equal to $100 billion and taxes related positively to real GDP by the equation:
Taxes = $25 billion + 0.1Y. If potential GDP is $850 billion, then the government has a
A) structural surplus of $10 billion.
B) structural deficit of $10 billion.
C) cyclical deficit of $10 billion.
D) cyclical surplus of $10 billion.
E) balanced budget.
3. Regarding the national debt, is a fallacy to believe
A) that it is a burden for future generations who must pay interest on the debt
through increased taxes.
B) that government borrowing may crowd out private investment.
C) that high interest payments on the debt may make deficits self-perpetuating.
D) that accumulating debt may be unsound financial practice.
E) all of the above.

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AS/ECON1010 P, Q 3 Term Test #2, 2010
4. Suppose OPEC unexpectedly collapses, decreasing the price of oil. This is a positive aggregate
supply shock. As a result, in the short run the price level will
A) increase and real GDP will decrease.
B) increase and real GDP will increase.
C) decrease and real GDP will decrease.
D) decrease and real GDP will increase.
E) increase and real GDP will stay the same.
5. If interest rates in Canada are greater than interest rates in Japan, interest rate parity
implies that
A) the inflation rate is higher in Japan.
B) Japanese financial assets are poor investments.
C) the yen is expected to appreciate against the dollar.
D) the yen is expected to depreciate against the dollar.
E) Canadian financial assets are poor investments.
6. The exchange rate is volatile because
A) the demand curve for Canadian dollars is very flat.
B) government intervention always makes things worse.
C) the demand curve for Canadian dollars is very steep.
D) shifts in demand and supply curves for Canadian dollars are not independent of
each other.
E) shifts in demand and supply curves for Canadian dollars are independent of
each other.
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