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Midterm

ECON 1010 2014 midterm -steve edwards

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Department
Economics
Course
ECON 1010
Professor
Steven Edwards
Semester
Winter

Description
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) 100 225 200 300 300 375 400 450 500 525 600 600 2) Refer to Table 27.1.1. IfYD 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 5) The creation of a successful movie illustrates choices made in selfinterest that also achieve the 5) social interest if ________. 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 g-ing 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 6) people that it hired directly. This argument illustrates the idea 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 8) long-run aggregate supply curve? 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. 2 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 10) difference between ________ real GDP and potential GDP of $________billion. 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. 11) (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. 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 13) Which one of the following people is structurally unemployed? 13) A) a Nova Scotia fishery worker who is searching for a better job closer to home B) an office worker who has lost her job because of a general slowdown in economic activity C) a steel worker who is laid off but who expects to be called back soon D) a Saskatchewan welder who lost her job when her company relocated to B. C. and is currently looking for a job E) none of the above Use the figure below to answer the following questions. Figure 27.1.1 This figure describes the relationship between consumption expenditure and disposable income for a model economy. 14) Refer to Figure 27.1.1. When disposable income is $500 billion, saving is equal to 14) A) disposable income. B) $20 billion. C) consumption expenditure. D) zero. E) $40 billion. 15) Which one of the following variables has an induced component? 15) A) government expenditure on goods and services B) exports C) investment D) consumption E) all of the above 4 16) If the working-age population increases, then 16) A) the number of people employed will increase. B) the unemployment rate will increase. C) the size of the labour force will increase. D) the labour force participation rate will increase. E) the total number of people aged 15 years and above will increase. 17) Suppose Angela falls in love with and subsequently marries her regularly employed housekeeper, 17) Tony. What effect would this action have on GDP? A) It would fall. B)It depends on whether he starts to work in the house free of charge or whether she still pays him. C) It would fall but then increase after the honeymoon was over. D) It would stay the same. E) It would rise. Use the figure below to answer the following questions. Figure 2.2.1 18) In Figure 2.2.1, the curve labelledA is the________curve and the curve labelledB is the________ 18) curve. A) production possibilities; trade B) marginal cost; trade C) marginal benefit; marginal cost D) marginal benefit; trade E) marginal cost; marginal benefit 19) The aggregate demand curve is a relationship between 19) A) real aggregate expenditure and real GDP. B) real prices and real GDP. C) the price level and the quantity of real GDP demanded. D) real income and real GDP. E) the price level and nominal GDP. 5 20) SaskWidget produces plastic parts. At the beginning of the year, they held $24 million worth of 20) capital. At the end of the year, they held $20 million worth of capital. One can conclude that A) gross investment decreased by $4 million. B) net investment increased by $4 million. C) gross investment increased by $4 million. D) depreciation equals $4 million. E) depreciation exceeded gross investment by $4 million. 21) In a country with a working-age population of 30 million, 18 million are employed, 2 million are 21) unemployed, and 2 million of the employed are working part time- half of whom wish to work full-time. The labour force is A) 16 million. B) 20 million. C) 30 million. D) 18 million. E) 22 million. Use the figure below to answer the following questions. Figure 27.2.1 There are no exports or imports in this economy. 22) Refer to Figure 27.2.1. When real GDP is equal to Y b then 22) A) actual expenditure is less than planned expenditure. B) actual expenditure is greater than planned expenditure. C) real GDP decreases. D) planned expenditure is equal to actual expenditure. E) real GDP increases. 23) Some sales managers are talking shop. Which one of the following quotations refers to a rightward 23) shift of the demand curve? A) "Since our competitors raised their prices, our sales have doubled." B) "The Green movement has sparked an increase in our sales of biodegradable products." C) "We decided to cut our prices, and the increase in our sales has been remarkable." D) "It has been an unusually harsh winter; our sales of wool scarves are up from last year." E) All of the aboveexceptC. 6 24) As we increase the production ofX, we find we must give up larger and larger amounts of Y per 24) unit of X. Select the best statement. A) This illustrates increasing opportunity cost. B) The production possibilities frontier forX and Y is a straight line. C) We must be inside the production possibilities frontier. D) GoodY will be more highly regarded by consumers than goodX. E) As a result, we should not specialize in the production ofX. 25) If a household's disposable income increases from $12,000 to $22,000 and at the same time its 25) consumption expenditure increases from $4,000 to $9,000, then A) the household is dissaving. B) the slope of the consumption function is 0.6. C) the marginal propensity to save over this range is negative. D) the marginal propensity
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