Practice Exam Questions
AGEC 217, Summer 2007
(Final Exam: August 3rd, 8:00 – 10:00 am, Krannert G002)
Circle the letter of the best response for each question. Several of these questions are more difficult
than what you will be on the exam. Good luck!
1.
Which of the following is counted in U.S. GDP?
a. final goods and services purchased by the government
b. both the peaches used by a bakery to make peach pies and the peach pies
c. goods and services produced by U.S. citizens working in foreign countries
d. None of the above are correct.
2.
In the country of Mainia, GDP consists of cranberries and maple syrup. In 2002, 50 units of cranberries are sold at $20 per
unit, and 100 units of maple syrup are sold at $10 per unit. If the price of cranberries was $10 per unit and the price of
maple syrup was $15.00 per unit in 2001, the base year, then nominal 2002 GDP is
a. $2,000, real 2002 GDP is $2,000, and the GDP deflator is 100.
b. $2,000, real 2002 GDP is $2,500, and the GDP deflator is 125.
c. $2,500, real 2002 GDP is $2,000, and the GDP deflator is 83.3.
d. None of the above are correct.
Use the table below to answer the following two questions.
year
2003
2004
3.
price of pork
$20
$20
price of corn
$20
$30
Suppose that the basket of goods in the CPI consisted of 3 units of pork and 2 units of corn. What is the consumer price
index for 2004 if the base year is 2003?
a. 100
b. 105
c. 115
d. 120
4.
Suppose that the basket of goods in the CPI consisted of 3 units of pork and 2 units of corn. What is the inflation rate for
2004?
a. 33.3 percent
b. 25 percent
c. 20 percent
d. 15 percent
5.
Which of the following is a determinant of productivity?
a. human capital
b. physical capital
c. natural resources
d. All of the above are correct.
6.
Which of the following would be considered physical capital?
a. the pizza oven at the Liquidity Preferences Tavern
b. soy beans used to make soy milk
c. the skills and knowledge of a barber
d. All of the above are correct.
7.
A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a
a. bond.
b. stock.
c. mutual fund.
d. All of the above are correct.
8.
Which of the following equations represents national saving in a closed economy?
a. Y – I – G – NX
b. Y – C – G
c. Y – I – C
d. G + C – Y
9.
Net capital outflow refers to the purchase of
a.
b.
c.
d.
10.
foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.
Which of the following equations is correct for an open economy?
a. S = I + C
b. S = I – NX
c. S = I + NCO
d. S = NX – NCO.
11.
If the tax revenue of the federal government exceeds spending, then the government
a. runs a budget deficit.
b. runs a budget surplus.
c. runs a national debt.
d. will increase taxes.
12.
Suppose that Congress were to institute an investment tax credit. What would happen in the market for loanable funds?
a. The demand for loanable funds would shift left.
b. The supply of loanable funds would shift left.
c. The demand for loanable funds would shift right.
d. The supply of loanable funds would shift right.
13.
If you put $300 in an account paying 2 percent interest, what is the future value of this account in two years?
a. $310
b. $312
c. $312.12
d. $314.24
14.
Who of the following would be counted as unemployed according to official statistics?
a. Shasta, who is waiting for her new job to start
b. Mary, who worked only 35 hours last week
c. Karen, who neither has a job nor is looking for one
d. None of the above would be counted as unemployed.
15.
Who would not be included in the labor force?
a. Jay, who is on temporary layoff
b. Mike, who has retired and is not looking for work
c. Jane, who does not have a job, but has applied for several in the last week
d. None of the above are included in the labor force.
16.
The labor-force participation rate measures the percentage of the
a. total adult population that is in the labor force.
b. total adult population that is employed.
c. labor force that is employed.
d. labor force that is either employed or unemployed.
17.
If the minimum wage was currently above the equilibrium wage, than a decrease in the minimum wage would
a.
b.
c.
d.
increase both the quantity demanded and the quantity supplied of labor.
decrease both the quantity demanded and the quantity supplied of labor.
increase the quantity of labor demanded and decrease the quantity supplied.
decrease the quantity of labor demanded and increase the quantity supplied.
18.
Which of the following is included in M2 but not in M1?
a.
currency
b.
demand deposits
c.
savings deposits
d.
All of the above are included in both M1 and M2
19.
Suppose that the reserve ratio is 10 percent and that a bank has $2,000 in deposits. Its required reserves are
a.
$20.
b.
$200.
c.
$1,880.
d.
$1,800.
20.
When the Federal Reserve conducts open market transactions, it
a. issues Federal Reserve notes.
b. buys or sells government bonds from the public.
c. lowers the discount rate.
d. increases its lending to member banks.
21.
When the price level falls, the number of dollars needed to buy a representative basket of goods
a. increases, so the value of money rises.
b. increases, so the value of money falls.
c. decreases, so the value of money rises.
d. decreases, so the value of money falls.
22.
When the money market is drawn with the value of money on the vertical axis, an increase in the money supply
a. increases the price level and the value of money.
b. increases the price level and decreases the value of money.
c. decreases the price level and increases the value of money.
d. decreases the price level and the value of money.