ECON 1O1OA: INTRODUCTION TO MACROECONOMICSDEPARTMENT OF ECONOMICS

FACULTY OF LIBERAL ARTS AND PROFESSIONAL STUDIES

YORK UNIVERSITY

MIDTERM EXAMFALL 2011Version 3

Course Director: Dr. Sadia Mariam Malik

TOTAL POINTS: 100

TOTAL WORTH:30o/o

STUDENT NAME , tl ll',

STUDENT I.D.: 1r' ;:E ti ,i,, i:; Qi;! b

INSTTTUCTIONS:

1. This exam consists of lmultiple choice questions. There is only one correct

answer.

Z. Circle your final answer for every question on each page of the exam and

carefuily mark the selected letter on the computefized Answer Sheet.

3. Use HB pencils onlY.

4. Or1ly non-programmable catrculators and your student I.D is allowed to be with

you on your desk.

5. Time Allowed: 90 minutes

GOOD LUCK!

Midterm Exam/Econ 1010A/Fall 201 1

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) If Sam is producing at a point inside his production possibilities frontier, then he

A) is unaffected by costs and technology.

7 B) must be doing the best he can with limited resources.' C) is fully using all his resources and allocating his resources to their best use.

D) can increase production of both goods with zero opportunity cost.

E) has a high opportunity cost of moving from this point.

2) Which of the following newspaper headlines concerns a macroeconomic issue? 2)

A) \ fhy do grain producers purchase less pesticides?

@Wtty are people buying more SUVs and fewer minivans? .--C) How would an unexpected freeze in Oxford, Nova Scotia change the price of blueberries in

the Maritimes?D) How would a tax on e-commerce affect chapters.indigo.ca?E) Ia/hy is Japan's economy stagnant? ",

3) When a farmer decides to harvest tomatoes using machines instead of migrant workers, thefarmer is answerins the ouestion.

A) "how" B) "who" C) "wherel' D) "when" E) "what"

4) Which of the following is an example of a positive statement?

A) Increasing the minimum wage results in more unemployment.B) Canada should have lower taxrates for wealthier Canadians.C) The Bank of Cinada ought to cut the interest rate.

D) Canada should cut back on its use of carbon-based fuels such as coal and oil.E) Every Canadian should have equal access to health care.

5) For the aggregate economy, income equalsA) expenditure equals GDP only if there is no depreciation.B) expenditure equals GDP.C) GDB but expenditure is generally less than these.

D) expenditure equals GDP only if there is no govemment or foreign sectors.

E) expenditurg but these are not generally equal to GDP.

6) A production possibilities frontier will shift outward FOR ALL OF THE FOLLOWINGREASONS EXCEPT

A) an increase in the stock of capital.B) a technological improvement.,

70 oppot*nity cost is increasing'**D) an increase in the labour force.-.

2 E; none of the above.

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tlse the table below to answet the following questions'

Table20.2.6There are only two goods in this economy.

Price Quantity

Computer Dsks 1'00 1.80 25,000 18,000

7) Refer to Table 20.2.6.Consider the data in this table. What is current real GDP in terms of base'

year prices?

A) $192,000.

B) $95,000.

@$sa,ooo'D) $189,900.

E) None of the above

8) Refer to Table 20.2.6. Consider the data in this table. What is current nominal G*D-"-P?

A) $192,000.

f,y'$tsr,ooo'c) $95,000.

D) $93,000.

E) None of the above.

9) Unemployment caused by permanently decreased demand-fol horse-drawn carriages is a4

example ofA) cyclical unemPloYment.

B) discouraged unemPloYment.

Stmctural unemPloYment.

D) seasonal unemPloYment.

E) frictional unemPloYment.

L0) Individuals A and B can both produce good X. We say thatA has a comparati-v.g a-dyantage in

the production of good X ifA) A can produce more units of X in a given time period than B'

B) A can produce X using newer technology than B'

C) A has a higher opportunity cost of producing X than B'

@enasa lower opportunity cost of producing X than B'

E) A can produce less units of X in a given time period than B'

11) Suppose the economy of Econoworld produces only two goods, kayaks and birdseed. In one

y"ii ZOkayaks are produced and sold for $1,000 each and 10 bags of birdseed are produced and

sold for $30 each. The value of nominal GDP for this year is d;**C'it

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A) $23,000.

B)$20,000.c) $300.

ff$zo,aoo.E) 20 kayaks plus L0 bags of birdseed.

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12) Which approach to measuring GDP is being used when Statistics Canada sums wages, salaries

and supplementary labour income, corporate profits, interest and miscellaneous investment

income, farmers'income, and income of non-farm unincorporated businesses?

A) Opportunity cost aPProach'

B) Factor cost approach.

C) Value-added approach.

Bl..o*u approach.

E) Expenditure approach.

13) If the economy is at full employment, then

A) the entire labour force is employed'

B) all unemployment arises from normal frictions and structural change. -C) the unemployment rate is less than 3 percent'

D) the only unemployment is frictional unemployment plus discouraged workers.

E) the entire population is employed.

1a) Whqn we use PPP we can make valid intemational comparisons of real GDP because we 1'4

@/calculate the value of goods and services produced in two countries using the same prices' --B) calculate the value of goods and services produced in two countries using the same

quantities.C) use the health and education data.

D) use official government data.

E) use data provided bY the IMF.

15) Which of the following is the best definition of economics?

A) The study of how producers decide what inputs to hire.and what outputs to produce.

The study of how a provincial.goverlment allocates tax dollars'

The study of how individuals, businesses, govemments, and entire societies make choices

as they cope with scarcity and the incentives that influence and reconcile those choices.

D) The study of how consumers spend their income'

E) The study of how consumers and producers meet each other at the market.

16) Nominal GDP will increase

A) only if the unemployment rate rises.

B) only if both the average level of prices rises and the quantity of goods and services

produced increases.

C) only if the quantity of goods and services produced increases'

D) only if the average level of prices rises.

fff "itf,"t the average level of prices rises or the quantity of goods and services produced

increases.

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Use the information below to answil the following questions.

Fact2.4.2

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AgnescanproduceeitherlunitofXorlunitofYinanhour,whileBrendacanproduceeither2unitsofXor4unitsof Yin an hour.

17) Given F act 2.4.2, the opportunity cost of producing a uni! of X isA) 1 unit of Y for Agnes and 1.12 unit of Y for Brenda.B) t hour for Agnes and 2 hours for Brenda.

fi "*\ of Y for Agnes and 2 units of Y for Brenda. -D) 1. hour for Agnes and U4 hour for Brenda.,E) t hour for Agne_s 1nd 1,12 hour for Brenda. ,

18) Refer to Fact 2.4.2.tNhich one of the following statements is true?

-A) Brenda has an absolute advantage over Agnes in the production of both goods.

B) Brenda will not gain from trade.C) Agnes has a comparative advantage in the production of Y. ?-

- D) Brenda has a comparative advantage in the production of X.E) Agnes will not gain from trade.

The fixed basket of Econoland consists of L0 units of A,20 units of B, and 30 units of C. Currentprices are $1 per unit of A,$2per unit of B, and $3 per unit of C. Base year prices are 91 for each

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f'n'unit of A, B, and C. What is the CPI in the curre_4t year?

A) 100 @zz c) +so

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D) 43

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21) When the government of Alberta chooses to build more roads, the required resources are no

135 and the end of 2008, what was the inflation rate in

tTa:99*Lq

20) When the unemployment rate is less than the natural uner4g{oyment rate, real GDP is 20) &- '

than potential GDP and the output gap is

o A)gi6ater; negative

Sgteategpositive -C) smaller; positiveD) greater; equal to zero .

E) smaller; negative

lonser available to provide better health care facilities. This situation illustrates the concept of -/^ A'-/A/opportunity cost.

B) human capital.C) entrepreneurship.D) monetary cost.

E) marginal benefit,

22) If the CPI was 128 at the end of 2Q07 and2008?

A) 5.9 percentB) 8 percentC) 4.2 percentD) 9.4 percent,AI

9/6.25 percent

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23) If you want to investigate the claim that more goods and services were produced in the economy 23) ,bduring 2008 than 2009, what should you look at?

A) Nominal GDP.

B) Intermediate GDP.

C) GDP calculated using the expenditure approach'

D) Real GDP. *E) Either B or D.

24) Incalculating GDP, economists use the value of final goods and services because

A) intermediate goods are imported from other countries.

B) GDP is underestimated if intermediate goods are used instead.

C) finat goods can be exported to other countries'

-D) by using final goods and services, they avoiddouble counting'

E) none of the above

25) The fact that a hockey star eams $3 million ayeil while a teacher eams $35,000 annually is an

example of an economy facing the " question.

A) "what"B) "when".C) "how"

@'to, whom" -E) "where"

26) Comparing the core inflation rate to the Consumer Price Index, the core inflation rate

A) controls for the biases of the CPI. --

B) includes volatile elements not in the CPI.

C) uses current period quantities, not base period quantities.

@excludes the volatile elements of the CPI.

E) measure's all goods produced, not just consumer goods.

22) Which one of the following events shifts the demand curve for grape ielly to the right?

A) an increase in the price of peanut butter, a complement of grape jelly

- B) an increase in income if .grapejelly is a normal good

C) a decrease in the poPulationD) a decrease in the price of strawberry Preserves, a substitute for grape jelly

E) a decrease in the price of grape jelly

28) A turnip is an inferior good if,@n increase in income decreases the demand for turnips. *B) tumips are considered to be substitues for potatoes.

C) tumips violate the law of demand'D) an increase in income increases the demand for turnips.

E) an increase in the price of a tumip decreases the quantity of turnips that consumers want to

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29) In a country with a working-age populationof 22 milliory 16 million are employed, 2 million are 29)unemployed, and 1. million of the employed are working part-time, half of whom wish to workfull-time. The unemployment rate is B ,^ 4

A) 15,4p"r"urtr.'"t'vJ'rsrrrrqrsrD fk*B) 10.3 percent.C) L0 percent.

Srr.i percent.E) none of the above.

30) l4/hich one of the following people would be counted as unemplolrld_in Canada?A) Benoit who was laid off when his firm closed down 2 months ago and has not been looking

for work as he is going back to school.B) Kathy has stopped looking for work since she was unable to find a suitable job during a

one-month search.C) Christos has been laid off from his job a month ago, and has not been looking for a new job

as he is waiting for a severance package from his former employer. _,,--rD) Veena is not working, but she is looking for afull-time job.

E) Sharon is a college Student with a job.

31) Which of the following items would be included in a current measure of GDP?A) Your labour in fixing a leaky pipe under your sink.B) The illegal sale of abagof marijuana.

- C) A professional gardener who regularly cuts your lawn.D) The value of safety on the streets of your community.E) All of the above.

32) \tVhich of the following will shift the supply curve ef good X rightward?A) an increase in the cost of capital used to produce good X

!lan increase in the price of energy

@/a decrease in the wages of workers employed to produce good X :D) a decrease in the number of suppliers of good XE) thej$e of Y, a substitute in production for good X, rises --

33) With dlocative efficiency, for each good produced,

A)*narginal benefit exceeds marginal cost by as much as possible. -/ B) marginal benefit equals marginal cost.

C) marginal benefit is at its maximum.*D) marginal cost is at its minimum.E) marginal cost exceeds marginal benefit by as much as possible.

34) If demand increases and supply decreases, then theA) effect on both equilibrium price and quantity is unknown.B) equilibrium quantity decreases but the effect on the equilibrium price is unknown.C) equilibrium price falls but the effect on the equilibrium quantity is unknown.@ equilibrium price rises but the effect on the equilibrium quantity is unknown.E) equilibrium quantity incredses but the effect on the equilibrium price is unknown.

30)-D-

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35) The business cycle is defined as the

A) regular growth rate of the real GDP.

@imegular fluchiations of real GpP around potential GDP. ,-C) regular fluctuations'of real GDP below potential GDP.

D) periodic and regular up-and-down movement of total produc,,$gn.

E) irregular fluctuations of prices around real GDP.

36) Why is the Human Development Index thought to be a better measure of economic well-being

than real GDP per person?

A) It includesleisure time and household production.B) It includes a measure of resource depletion. F

G) It inctudes health and education measures, as well as real GDP per person. o'

D) It includes only health and education measures, ignoring real GDP per person.

E) It ignores health, which is hard to measure.

37) The bowed-out (concave) shape of a production possibilities frontier

@eflects the existence of increasing opportunity cost. *B) is due to the equal usefulness of resources in all activities.

C) is due to capital accumulation.D) is dueio technological change.

E) reflects the existence of decreasing opportunity cost.

38) Jesse just graduated from university, and is looking for her first job' jesse is

A) cyclicatly unemployed.

- B; frictionally unemployed.C) structurally unemployed.D) notunemployed.E) not in the labour force.

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tuiee (dollur pqunitf

0 I00 200 300 400,$00 600

Figure 3.4.2

39) At a price of $10 a unit in Figure 3.4.2

A) there is a shortage of 400 units.B) there is a surplus of 200 units.

C) there is a shortage of 200 units.

D) there is a surplus of tt00 units.

E) quantity will rise. i

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40) Which of ttrb fottowingwould be an dxampteof a consumpfioif€lpendihire?

A) The purchase of a new computer by the IPSCO steel company.

B) An increll in wq$are paymenelg qiryl.F:qr.gths"rs.

C) More sP-etrd$g by the go-vcmr-rgt on childrenfE Programs'D) The purihase of a new carby thb Singh hdusehold.

E) All of the above.

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