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132%20Sample%20Exam%201.2009.pdf

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Department
Economics
Course
ECON 1132
Professor
Glen Peterson
Semester
Fall

Description
Ec. 132.02 - Sample Exam No. 1 - Spring 2009 I. Multiple Choice (60 points). For each of the following questions, encircle the answer you believe to be correct or most nearly correct. If you change your mind, cross one out and encircle another. 1. "The price of pizza rose in response to an increase in consumer incomes." The above might best be shown, using micro supply and demand curves, by: A. a shift to the left in the supply curve for pizza. B. shifts to the right in both the demand and supply curves. C. a shift to the left in the demand curve for pizza. D. a shift to the right in the demand curve for pizza. E. a shift to the right in the supply curve for pizza. 2. Of the following situations, the one most likely to be dealt with in microeconomics as opposed to macroeconomics, is: A. Hamburger sales fall in response to a story about infected beef. B. The unemployment rate continues to rise even though real GDP is growing. C. The President's stimulus plan is expected to increase consumer spending this year by about 0.5%. D. The Fed raises interest rates to slow down the economy. E. Corporate scandals lead to a widespread fall in consumer confidence. 3. The average rate of growth in real GDP for the U.S. over the past sixty years has been approximately: A. 5.5% per year. B. 7.0% per year. C. 1.0% per year. D. 2.0% per year. E. 3.4% per year. 4. If nominal GDP were rising at about 4% per year and the GDP deflator were rising at 3% per year, we could say that real GDP was: A. rising at about 7% per year. B. rising at about 1% per year. C. falling at about 1% per year. D. falling at about 3% per year. E. rising at about 3% per year. 5. If nominal GDP were rising at about 4% per year and the GDP deflator were falling at 3% per year, we could say that real GDP was: A. rising at about 7% per year. B. rising at about 1% per year. C. falling at about 1% per year. D. falling at about 3% per year. E. rising at about 3% per year. 6. If a firm has total sales of $60 million, of which it pays out $45 million in wages and salaries and $10 million in purchases from other firms, and has profit of $5 million, then its value added is equal to: A. $50 million. B. $60 million. C. $70 million. D. $30 million. E. $45 million. 2 7. In the “Classical” view of macroeconomics: A. shifts in aggregate demand can cause large swings in output and employment. B. market forces will by themselves tend to stabilize output and employment. C. stable output and employment can only be achieved with an activist fiscal policy. D. most of what we know about the macro economy can be found in Plato and Aristotle. E. The AS curve slopes gently up to Q* and then rapidly thereafter. 8. An example of a transfer payment, as the term is used in macroeconomics is: A. a payment to a trucker for shipping military goods. B. a social security pension check. C. an expenditure by General Motors for new equipment. D. a check to Allied Van Lines for moving household furniture. E. the salary of a social worker employed by the state government. 9. If the GDP deflator is 1.00 for 2000 and 1.10 for 2004, and if nominal GDP is $8000 billion for 2000 and $9900 billion for 2004, then real GDP for 2004, in terms of 2000 prices, is: A. $8000 billion. B. $8800 billion. C. $9000 billion. D. $9900 billion. E. $10890 billion. 10. Using the numbers in the question above, real GDP increased over the period 2000 to 2004 by approximately: A. 24% B. 36% C. 10% D. 12.5% E. 6% 11. Objectives, or goals, of macroeconomic policy as listed in your text include: A. the widespread acceptance of Keynesian economics. B. monetary policy. C. a stable or gently rising price level. D. a balanced government budget at all times. E. fiscal policy. 12. By the natural rate of unemployment, or NAIRU, we mean: A. that at which the inflation rate would be zero. B. that at which the inflation rate would tend neither to rise nor to fall. C. a rate of about 8%, as associated with the economy in India under Nehru. D. the rate of unemployment associated with Marx's "reserve army of the unemployed." E. that at which real output would tend neither to rise nor to fall. 13. The total of value added at all stages of production is equal to: A. the total cost of purchases from other firms at all stages of production. B. the cost of purchases from other firms minus the selling price of the product. C. the cost of purchases from other firms at the last stage of production. D. the selling price of the final product. E. the total of sales receipts at all stages of production. 3 Questions 14-18 are based on the following data, all given in billions of dollars, with all terms as used in class. Assume the extreme Keynesian model with rigid prices and wages, no depreciation, no imports or exports, and no business savings. Assume that Q* is equal to $1100 billion. Q DI C I G 600 400 400 100 175 700 500 475 100 175 800 600 550 100 175 900 700 625 100 175 1000 800 700 100 175 1100 900 775 100 175 14. The marginal propensity to consume (out of disposable income) is: A. .50 B. .75 C. .60 D. .40 E. .80 15. The equilibrium level of output is: A. $1000 billion. B. $1100 billion. C. $700 billion. D. $800 billion. E. $900 billion. 16. An increase in government purchases of $50 billion, other things remaining the same, will raise the equilibrium level of output by: A. $50 billion. B. $125 billion. C. $75 billion. D. $100 billion. E. $200 billion. 17. The value of the expenditure multiplier in the above system is: A. 4.0 B. 5.0 C. 2.0 D. 2.5 E. 3.0 18. The value of the tax multiplier in the above system is: A. 4.0 B. 3.75 C. 1.5 D. 2.0 E. 3.0 4 19. The permanent income theory, as described in your text, implies that: A. income changes can be smoothed out through the use of monetary policy. B. investments in education generate permanent changes in incomes. C. once output and income have reached an equilibrium level, there is a strong tendency for them to stay at that level. D. new innovations or inventions generate permanent rather than just temporary changes in potential output. E. the impact on consumption of a change in income is greater if the change in income is one that can be expected to continue. 20. Suppose you have four proj
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