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ECON 1010 Study Guide - Midterm Guide: Disposable And Discretionary Income, Marginal Cost, Consumption FunctionExam


Department
Economics
Course Code
ECON 1010
Professor
All
Study Guide
Midterm

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Exam
Name___________________________________
Econ 1010 M Macro Economics Winter 2013 A
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Use the figure below to answer the following questions.
Figure 26.3.1
1)
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.
1)
A)
above full-employment equilibrium; 40
B)
above full-employment equilibrium; 20
C)
below full-employment equilibrium; 40
D)
full-employment equilibrium; 0
E)
below full-employment equilibrium; 20
2)
Refer to Figure 26.3.1. As Econoworld automatically adjusts to long-run equilibrium, the
2)
A)
AD curve shifts leftward.
B)
LAS curve shifts leftward.
C)
SAS curve shifts rightward.
D)
SAS curve shifts leftward.
E)
AD curve shifts rightward.
3)
A recessionary gap is the amount by which
3)
A)
the price level must adjust to achieve full employment.
B)
demand will increase to achieve full employment at a given price level.
C)
potential GDP exceeds real GDP.
D)
real GDP exceeds potential GDP.
E)
the supply curve must increase to achieve full employment at a given price level.
1

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Use the information below to answer the following questions.
Fact 3.5.1
The market for coffee is initially in equilibrium. Pepsi is a substitute for coffee; cream is a complement of coffee. Consider the
market for coffee. Assume that all ceteris paribus assumptions continue to hold except for the event listed.
4)
Refer to Fact 3.5.1. An increase in the price of Pepsi, a substitute for coffee will
4)
A)
decrease the price and the quantity supplied of coffee.
B)
decrease the price and the quantity demanded of coffee.
C)
increase the price and the quantity supplied of coffee.
D)
increase the price and the quantity demanded of coffee.
E)
cause none of the above.
5)
Which of the following events would shift the consumption function upward?
5)
A)
a decrease in wealth
B)
a decrease in disposable income
C)
an increase in wealth
D)
a decrease in expected future disposable income
E)
an increase in disposable income
6)
Real GDP will increase only if the
6)
A)
quantity of goods and services produced increases.
B)
employment rate rises.
C)
employment rate falls.
D)
unemployment rate rises.
E)
average level of prices rises.
Use the table below to answer the following questions.
Table 20.2.1
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
Corporate profits 140
80
Indirect taxes 120
Net exports 80
Consumption expenditure 640
Interest and miscellaneous investment income 100
7)
Refer to Table 20.2.1. From the data in the table, what is total income in Eastland?
7)
A)
$1,420.
B)
$1,360.
C)
$1,280.
D)
$1,120.
E)
$1,180.
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8)
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 labour force is
8)
A)
30 million.
B)
18 million.
C)
20 million.
D)
22 million
E)
16 million.
9)
Which of the following quotations illustrates the idea of the multiplier?
9)
A)
"Higher expected profits are leading to higher investment spending by business, and will lead
to higher consumer spending."
B)
"Taking the grain elevator out of our small town will destroy 300 jobs."
C)
"The new stadium will generate $200 million in spinoff spending."
D)
"The projected cuts in government jobs will hurt the local retail industry."
E)
all of the above
10)
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?
10)
A)
$1,300.
B)
$500.
C)
$800.
D)
$305.
E)
$1,605.
11)
Disposable income is
11)
A)
aggregate income minus transfer payments.
B)
aggregate income plus transfer payments.
C)
aggregate income minus taxes.
D)
used for consumption only.
E)
aggregate income minus taxes plus transfer payments.
3
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