ECON 1002 C Hunter Lupal It is most beneficial to you to write this mock midterm UNDER EXAM CONDITIONS. This means: • Complete the midterm in 1.5 hour(s). • Work on your own. • Keep your notes and textbook closed. • Attempt every question. After the time limit, go back over your work with a different colour or on a separate piece of paper and try to do the questions you are unsure of. Record your ideas in the margins to remind yourself of what you were thinking when you take it up at PASS. The purpose of this mock exam is to give you practice answering questions in a timed setting and to help you to gauge which aspects of the course content you know well and which are in need of further development and review. Use this mock exam as a learning tool in preparing for the actual exam. Please note: • Come to the PASS workshop with your mock exam complete. During the workshop you can work with other students to review your work. • Often, there is not enough time to review the entire exam in the PASS workshop. Decide which questions you most want to review – the Facilitator may ask students to vote on which questions they want to discuss in detail. • Facilitators do not bring copies of the mock exam to the session. Please print out and complete the exam before you attend. • Facilitators do not produce or distribute an answer key for mock exams. Facilitators help students to work together to compare and assess the answers they have. If you are not able to attend the PASS workshop, you can work alone or with others in the class. Good Luck writing the Mock Exam!! Dates and locations of mock exam take-up: February 25th from 6-9pm in AP 132 ECON 1002 C Hunter Lupal 1. What is the definition of GDP? a. The market value of all final goods and services produced within a country in a given period of time b. The market value of all goods and services produced within a country in a given period of time c. The market value of all goods and services in progress that are produced within a country in a given period of time d. The market value of all final goods produced within a country in a year 2. Which of the following is the correct identity for GDP? a. Y = C + I + G – NX b. Y = C + I – G + NX c. Y = C + I + G + NX d. Y = C – I – G – NX 3. If the nominal GDP is $400 and the real GDP is $350, what is the GDP deflator? a. 0.875 b. 87.5 c. 1.14 d. 114.29 Multiply by 100 at the end 4. The inflation rate is the percentage change in the price index from the preceding period. If the CPI in 2016 was 125 and in 2017 it was 130, what would the inflation rate in 2017 be? a. 4% b. -0.04% c. 3.85% d. -0.0385% ((130-125)/125) * 100 ECON 1002 C Hunter Lupal 5. Which of the following is not a problem in measuring the cost of living (using the CPI)? a. Commodity substitution bias b. Introduction of new goods c. Unmeasured quality change d. Uneven basket prices 6. Which of the following is the type of interest rate that accounts for the effects of inflation? a. Nominal interest rate b. Real interest rate c. Both a and b account for the effects of inflation d. None of the above 7. What does the catch-up effect state? a. That countries that start off poor tend to grow more rapidly than countries that start off rich b. That countries that start off rich tend to grow more rapidly than countries that start off poor because they have established roots c. That countries that start off rich will give capital and resources to countries that are poor in order to stimulate growth in their economies d. That countries that start off poor have no chance of catching up to countries that start off rich 8. Which of the following is not an example of a factor that determines productivity? a. Physical capital b. Natural resources c. Human capital ECON 1002 C Hunter Lupal d. A high population 9. Which of the following is true about diminishing returns? a. When there is a low level of capital in an economy, an extra unit of capital leads to a large increase in output b. When there is a high level of capital in an economy, an extra unit of capital leads to a small increase in output c. Both a and b are true d. Both a and b are false 10. What does the term productivity refer to? a. The quantity of goods and services that a worker can produce for each hour of work b. The speed at which a worker can produce a good c. The maximum quantity of quality goods and services that a worker can produce d. The maximum quantity of goods and services that a worker can produce, even if some finished goods are of low quality 11. What is a bond? a. A certificate of ownership in a firm b. A certificate of indebtedness c. A way to finance through equity d. A cheque 12. Which of the following is not an advantage of a mutual fund? a. They allow people with small amounts of money to diversify b. They give regular people access to the skills of professional money managers ECON 1002 C Hunter Lupal c. They create a medium of exchange that is highly liquid d. None of the above 13. In a closed economy, what does saving equal? a. Investment b. Consumption c. Government Purchases d. GDP 14. If there was an increase in the supply of loanable funds, what would the results be? a. An increase in the equilibrium quantity of loanable funds and an increase in the equilibrium interest rate b. A decrease in the equilibrium quantity of loanable funds and an increase in the equilibrium interest rate c. An increase in the equilibrium quantity of loanable funds and a decrease in the equilibrium interest rate d. A decrease in the equilibrium quantity of loanable funds and a decrease in the equilibrium interest rate 15. Which of the following is not a category determined by Statistics Canada when conducting the Labour Force Survey? a. Employed b. Unemployed c. Seeking employment d. Not in the labour force 16. What is the natural rate of unemployment? a. The deviation of unemployment from its natural rate ECON 1002 C Hunter Lupal b. Unemployment that results because of the time it takes for workers to search for the jobs that best suit their skills and preferences c. The rate of unemployment to which the economy tends to return to in the long run d. Unemployment that results because the amount of jobs available in some labour markets is insufficient to give a job to everyone who is seeking one 17. What is the purpose of Employment Insurance (EI)? a. To ease the burden of those who find themselves unemployed by temporarily providing them with income b. To ease the burden of those who find themselves unemployed by permanently providing them with income c. To ease the burden of those who find themselves unemployed, solely due to a disability or an injury d. To ease the burden of those who find themselves unemployed, solely due to lay-offs 18. What does the theory of efficiency wages suggest? a. Firms operate more efficiently if wages are kept above the equilibrium level b. Firms operate more efficiently if wages are kept at the equilibrium level c. Firms operate more efficiently if wages are kept below the equilibrium level d. It does not matter at what level firms decide to place their wages, as long as each employee is satisfied 19. Which of the following is not a function of money? a. A demand deposit b. A medium of exchange c. A unit of account ECON 1002 C Hunter Lupal d. A store of value 20. Which of the following would likely be the most liquid asset? a. A $20 bill b. A house c. An oil painting d. A signed, first edition of a book 21. Which of the following is true about commodity money? a. It is money without intrinsic value b. It is money with intrinsic value c. It holds value because of government decree d. An example of commodity money would be a US dollar bill 22. What is fractional-reserve banking? a. A banking system in which banks hold 100% reserves b. A banking system in which banks hold 0% reserves c. A banking system in which banks hold only a fraction of deposits as reserves d. A banking system that doesn’t allow for the bank to create any money 23. What would the result of an increase in the money supply be? a. A decrease in the value of money and a decrease in the price level b. A decrease in the value of money and an increase in the price level c. An increase in the value of money and a decrease in the price level d. An increase in the value of money and an increase in the price level 24. Which of the following statements is true? ECON 1002 C Hunter Lupal a. Nominal variables are variables measured in physical units and real variables are variables measured in monetary units b. Real variables are variables measured in physical units and nominal variables are variables measured in monetary units c. Both real and nominal variables are measured in monetary units d. Both real and nominal variables are measured in physical units 25. What does monetary neutrality propose? a. That changes in the money supply affect neither real nor nominal variables b. That changes in the money supply affect both real and nominal variables c. That changes in the money supply don’t affect nominal variables d. That changes in the money supply don’t affect real variables 26. What is the Fisher effect? a. The unequal adjustment of the real interest rate to the inflation rate b. The one-for-one adjustment of the real interest rate to the inflation rate c. The one-for-one adjustment of the nominal interest rate to the real interest rate d. The one-for-one adjustment of the nominal interest rate to the inflation rate 27. What is the difference between net exports and trade balance? a. Net exports is the value of a nation’s exports, whereas trade balance is exports minus imports b. Trade balance is the value of a nation’s exports, whereas net exports is exports minus imports c. Net exports is the value of a nations exports plus imports, whereas trade balance is exports minus imports d. There is no difference between the two terms ECON 1002 C Hunter Lupal 28. When net exports are zero, a country is said to have what? a. Balanced trade b. Trade surplus c. Trade deficit d. Zero trade 29. If the price of a Big Mac in California is $4.50 US, and the price of a Big Mac in Canada is $5.80, what would the predicted exchange rate be? a. 1.29 $US/$CAD b. 1.29 $CAD/$US c. 0.77 $CAD/$US d. 2.06 $CAD/$US 30. What does it mean if a country has perfect capital mobility? a. They have full access to world financial markets b. No one has access to the Canadian financial market c. Money has a high velocity d. Money has a low velocity 31. In a small open economy with perfect capital mobility, what determines the demand for loanable funds? a. National saving b. Domestic investment c. The world interest rate d. Net capital outflow 32. What is capital flight? ECON 1002 C Hunter Lupal a. A small and gradual reduction in the demand for assets located in a country b. A small but sudden reduction in the demand for assets located in a country c. A large but gradual growth in the demand for assets located in a country d. A large and sudden reduction in the demand for assets located in a country 33. How does the depreciation of a currency effect net exports? a. Exports become cheaper, imports become more expensive, thus net exports increase b. Exports become more expensive imports become more expensive, thus net exports increase c. Exports become cheaper, imports become cheaper, thus net exports increase d. Exports become cheaper, imports become more expensive, thus net exports decrease 34. Nominal GDP is the production of goods and services valued at… a. Current prices b. Constant prices c. Prices from the previous year d. Predicted prices 35. What is indexation? a. The automatic correction of a dollar amount for the effects of inflation by law or contract b. The manual correction of a dollar amount for the effects of inflation by law or contract ECON 1002 C c. The automatic correction for the effects of inflation d. The manual correction for the effects of inflation Hunter Lupal
