ECON 202 - Macroeconomic Principles
ECON 202 - Macroeconomic Principles ECON 202
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Date Created: 01/29/16
ECON 202 Mid Term #2 (Set A) Please write your question set on your scantron. Answer the following multiple-choice questions: Figure 1: Demand curve. 1. Two goods are substitutes when a decrease in the price of one good (a) decreases the demand for the other good. (b) decreases the quantity demanded of the other good. (c) increases the demand for the other good. (d) increases the quantity demanded of the other good. 2. Refer to Figure 1. Which of the following would cause the demand curve to shift from Demand A to Demand B in the market for oranges in the United States? (a) a freeze in Florida (b) a technological advance that allows oranges to ripen faster (c) a decrease in the price of tangerines (d) an announcement by the FDA that oranges prevent heart disease 3. Refer to Figure 1. Which of the following would cause the demand curve to shift from Demand C to Demand A in the market for oranges in the United States? (a) a freeze in Florida (b) a technological advance that allows oranges to ripen faster (c) a decrease in the price of tangerines (d) an announcement by the FDA that oranges prevent heart disease 4. Refer to Figure 2. Which of the following would cause the supply curve to shift from Supply A to Supply C in the market for winter coats? (a) an increase in the price of winter coats (b) a decrease in the number of ▯rms selling winter coats 1 Figure 2: Supply. (c) a decrease in the price of zippers and snaps (d) a decrease in the price of winter hats and gloves 5. Refer to Figure 2. Which of the following would cause the supply curve to shift from Supply B to Supply A in the market for disposable ballpoint pens? (a) a decrease in the price of disposable ballpoint pens (b) an increase in the price of fountain pens (c) an increase in the price of ink (d) an improvement in technology that allows ▯rms to use less labor in the production of disposable ballpoint pens 6. James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent. How much do the housing services provided by the two houses contribute to GDP? (a) $0 (b) $10,000 (c) $12,000 (d) $22,000 7. Over time, people have come to rely more on market-produced goods and services and less on goods and services they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire cleaning agencies. By itself, this change has (a) caused measured GDP to fall. (b) not caused any change in measured GDP. (c) caused measured GDP to rise. (d) probably changed measured GDP, but in an uncertain direction; the direction of the change depends on the di▯erence in the quality of the cleaning that has resulted. 8. Spots, Inc. produces ink and sells it to Write on Target, which makes pens. The ink produced by Spots, Inc. is called (a) an inventory good. 2 (b) a transitory good. (c) a ▯nal good. (d) an intermediate good. 9. Sam, an American citizen, prepares meals for his family at home. Ellen, a Canadian citizen, commutes to the U.S. to help prepare meals at a restaurant in Idaho. Whose value of services preparing meals is included in U.S. GDP? (a) Sam’s and Ellen’s. (b) Sam’s but not Ellen’s. (c) Ellen’s but not Sam’s. (d) Nether Sam’s nor Ellen’s. 10. The purchase of rice produced this period is separately included in GDP if the rice is (a) used in a meal a restaurant sells during the same period they buy the rice. (b) purchased by a family who uses it to make tuna casserole for its supper. (c) purchased by a frozen food company to increase its inventory. (d) both (b) and (c) are correct. Table 1: The country of Adland (2007). Item Quantity Price Milk 200 gal $2.50/gal Bread 500 lbs $2/lb Oranges (grown in Brazil) 300 lbs $1.50/lb Jackets (made in Taiwan) 70 $70 Jacket buttons (5/jacket, made in Taiwan) 400 $0.20 Factory storage sheds 10 $20,000 New houses 10 $160,000 Adland Fuel (re▯ned in Adland and sold in other countries) 600 gal $3.5/gal Public school buses 20 $30,000 11. From Table 1, total consumption expenditure (C) for Adland in 2007 is (a) $9,350 (b) $6,850 (c) $8,000 (d) $10,050 12. From Table 1, total investment expenditure (I) for Adland in 2007 is (a) $1,800,000 (b) $1,160,000 (c) $4,500,000 (d) $9,350,000 13. From Table 1, total government purchases (G) for Adland in 2007 are (a) $750,000 (b) $600,000 3 (c) $700,000 (d) $450,000 14. From Table 1, net exports (NX) for Adland in 2007 are (a) -$3,600 (b) -$3,250 (c) $2,800 (d) $3,250 The country of Lakeland produces only oats and milk. Quantities and prices of these goods for the last several years are shown in Table 2. The base year is 2008. Table 2: The country of Lakeland. Year Price of Oats Quantity of Oats Price of Milk Quantity of Milk 2008 $4.00 90 $1.50 150 2009 $4.00 100 $2.00 180 2010 $5.00 120 $2.50 200 2011 $6.00 150 $3.50 200 15. Refer to Table 2. In 2008, Lakeland’s (a) nominal GDP was equal to real GDP, and the GDP de ator was equal to 1. (b) nominal GDP was equal to real GDP, and the GDP de ator was equal to 100. (c) nominal GDP was less than real GDP, and the GDP de ator was less than 100. (d) nominal GDP was greater than real GDP, and the GDP de ator was greater than 100. 16. Refer to Table 2. Lakeland’s in ation rate (measured using the GDP de ator) from 2010 to 2011 was (a) 26.1%. (b) 15.4%. (c) 77.8%. (d) 45.5%. 17. If the consumer price index was 100 in the base year and 107 in the following year, then the in ation rate was (a) 1.07 percent. (b) 7 percent. (c) 10.7 percent. (d) 107 percent. Table 3 below pertains to Moravia, an economy in which the typical consumers basket consists of 5 books and 10 calculators. 18. Refer to Table 3. The cost of the basket in 2006 was (a) $32. (b) $200. (c) $280. (d) $480. 4 Table 3: The country of Moravia. Year Price of a Book Price of a Calculator 2006 $24 $8 2007 $30 $12 2008 $32 $15 19. Refer to Table 3. If 2007 is the base year, then the consumer price index was (a) 74.1 in 2006, 100 in 2007, and 114.8 in 2008. (b) 74.1 in 2006, 270 in 2007, and 310 in 2008. (c) 200 in 2006, 100 in 2007, and 114.8 in 2008. (d) 200 in 2006, 270 in 2007, and 310 in 2008. 20. Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the soft drink section, she notices that the price of ginger ale has increased 15 percent, so she decides to buy some peppermint tea instead. To which problem in the construction of the CPI is this situation most relevant? (a) substitution bias (b) introduction of new goods (c) unmeasured quality change (d) income e▯ect 21. Suppose that U.S. mining companies purchase German-made ore trucks at a reduced price. By itself, what e▯ect will this purchase have on the GDP de ator and on the consumer price index? (a) The consumer price index and the GDP de ator will both fall. (b) The consumer price index and the GDP de ator will both be una▯ected. (c) The consumer price index will fall, and the GDP de ator will be una▯ected. (d) The consumer price index will be una▯ected, and the GDP de ator will fall. 22. Arlo is o▯ered a job in Des Moines, IA, where the CPI is 80, and a job in New York City, NY, where the CPI is 125. Arlo’s job o▯er in Des Moines is for $42,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power? (a) $42,000 (b) $65,625 (c) $68,880 (d) $189,000 23. Mary worked part-time for her mother’s business without pay. Larry was absent from work because he had the u. Who is counted as employed by the BLS? (a) Mary but not Larry (b) Larry but not Mary (c) both Marry and Larry (d) neither Mary nor Larry 24. Refer to Table 4. What is the adult population in Meditor? (a) 90 million 5 Table 4: 2009 labor data for adults in Meditor (in millions). Males not in labor force 45 Females not in labor force 35 Males unemployed 5 Females unemployed 5 Males employed 85 Females employed 65 (b) 160 million (c) 230 million (d) 240 million 25. Refer to Table 4. What is the adult labor force in Meditor? (a) 90 million (b) 150 million (c) 160 million (d) 230 million 26. Refer to Table 4. What is the adult unemployment rate in Meditor? (a) 4.2 percent (b) 6.25 percent (c) 6.7 percent (d) 10 percent 27. Refer to Table 4. What is the adult labor-force participation rate in Meditor? (a) 37.5 percent (b) 62.5 percent (c) 66.7 percent (d) 95.8 percent 28. Bob is looking for work after school, but everywhere he ▯lls out an application, the managers say they always have a lot more applications than open positions. Tom has a law degree. Several ▯rms have made him o▯ers, but he thinks he might be able to ▯nd a ▯rm where his talents could be put to better use. (a) Bob and Tom are both frictionally unemployed. (b) Bob and Tom are both structurally unemployed. (c) Bob is frictionally unemployed, and Tom is structurally unemployed. (d) Bob is structurally unemployed, and Tom is frictionally unemployed. 29. Suppose that autoworkers are unionized in one region of the country but not in the other. If the unionized workers abolished their unions, employment (a) and wages of autoworkers in that region would rise. (b) of automobile workers in that region would rise, but wages of automobile workers in that region would fall. (c) and wages of autoworkers in that region would fall. 6 (d) of automobile workers in that region would fall but wages of automobile workers in that region would rise. 30. The invention of the telegraph led to the loss of jobs for those who had delivered mail by horse, but created jobs for telegraph operators and delivery persons. This is an example of (a) structural unemployment created by e▯ciency wages. (b) structural unemployment created by sectoral shifts. (c) frictional unemployment created by e▯ciency wages. (d) frictional unemployment created by sectoral shifts. 7
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