Name:___________________
Class Time:____________________
Midterm # 1
“Principles of Macroeconomics”
NSCC - Fall 2009
Professor: Moonsu Han
Total of 25 pts.
Question 1 Bring definitions for following terms. (6 pts.)
1. CPI (1 pt.):
2. GDP (1 pt.):
3. Similarity and Difference btwn CPI and GDP Deflator (2 pts.):
4. Similarity and Difference btwn Human Capital and Organization capital (2 pt.):
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Question 2 Below is some data from the land of beer and wine.
Year
2005
2006
2007
Price of Beer
$10
$12
$15
Q of Beer
1,000
2,000
3,000
Price of Wine
$20
$30
$40
Q of Wine
1,000
2,000
3,000
1. Compute nominal GDP, real GDP, and the GDP deflator for each year, using
2004 as the base year. Need to show detailed calculation. (3 pts.)
2005 Nominal GDP:
2006 Nominal GDP:
2007 Nominal GDP:
2005 Real GDP:
2006 Real GDP:
2007 Real GDP:
2005 GDP Deflator:
2006 GDP Deflator:
2007 GDP Deflator:
2. Compute the percentage change in nominal GDP, real GDP, and the GDP deflator
in 2005 and 2006 from the preceding year. Need to show detailed calculation.
(3 pts.)
2005-06 % change in Nominal GDP:
2006-07 % change in Nominal GDP:
2005-06 % change in Real GDP:
2006-07 % change in Real GDP:
2005-06 % change in GDP Deflator:
2006-07 % change in GDP Deflator:
3. Did economic well-being rise more in 2006(=from 2005 to 2006) or 2007(from
2006 to 2007)? Explain. (2 pts.)
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Question 3 Suppose that people consume only three goods, as shown in following table.
Tennis Balls
Tennis Racquets
$3
$50
2003 Price
100
10
2003 Quantity
$3
$75
2004 Price
200
20
2004 Quantity
Note: Use fixed basket of goods: 100 balls, 10 rackets, 200 Gatorades
Gatorade
$1
200
$2
300
1. What is the percentage change in the price of each of the three goods? (1 pt.)
What is the percentage change in the overall price level? (2 pts.)
Tennis Ball:
Tennis Racquet:
Gatorade:
Overall Price Level Change:
2. Do tennis racquets become more or less expensive relative to Gatorade? Does the
well-being of some people change relative to the well-being of others? Explain.
(2 pts.)
Question 4
Suppose that there is a country called NSCC Republic. The Bureau of Labor Statistics of
NSCC Republic announced that in January 2009, of all working age adult populations,
100,000 were unemployed, 700,000 were employed, and 200,000 were not in the labor
force. How big was the labor force? (1 pt.) What was the labor-force participation rate?
(1 pt.) What was the unemployment rate? (1 pt.)Need to show detailed calculations.
Labor force:
Labor-force participation rate:
Unemployment rate:
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Question 5 Draw per-worker production function for following cases. (4 pts.)
1. The per-worker production function shows the relationship btwn capital per
worker (K/L) and real GDP per worker (Y/L), holding technology constant.
Increases in capital per worker increase output per worker, but a diminishing rate.
(2 pts.)
2. The per-worker production function shows the relationship btwn capital per
worker and real GDP per worker with technology change. You should show the
change of production function that allows more output per worker with the same
amount of capital per worker. (2 pts.)
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Question 6 (4 Pts., 1 pt. each)
Using supply-and-demand diagrams, show the effect of the following events on the
market for loanable fund market and show changes of interest rate (i*) and equilibrium
quantity of loanable fund (Qf*).
1. A change in the tax law to encourage Americans to save. (Note: Gov’t lowers tax
on capital gains like interest income.)
2. Gov’t lowers tax on new investment due to the technology change.
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3. Government has budget surplus.
4. Gov’t spent more than it receives in tax revenue so there is a gov’t budget deficit.
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