ECON 102
Spring 2009
Name:..........................
1st Sample Midterm
PART 1
1) Refer to the figure below. Which flow arrow(s) represent taxes?
a)
b)
c)
d)
e)
E and F.
D and E.
G only.
E only.
F and G.
2) Aysegül’s mother loses her job because of laborsaving machinery. Because she has few
marketable skills, she stops looking for work. We would consider her to be __________
unemployed.
a) cyclically.
b) frictionally
c) structurally.
d) none of the above.
3) If the expected rate of inflation is 5 percent, and negotiators agree that real wages should
rise by 7 percent, the two sides will agree to an increase in money wages of
a) 2 percent
b) 5 percent
c) 7 percent
d) 12 percent
4) Long-term economic growth is reflected in the increasing trend in
a) the consumer price index
b) the unemployment rate
c) nominal GDP
d) real GDP
5) Refer to the following data: Labor force: 150 million. Employed: 120 million. What is the
unemployment rate?
a) 10 million
b) 5%
c) 20%
d) 80%
6) Refer to the graph below. What is the value of the multiplier?
a)
b)
c)
d)
2.5
0.6
0.4
100
7) At the equilibrium level of national income
a) there can be unintended inventory accumulation
b) purchasers are willing to bid up prices
c) purchasers are willing to buy exactly the amount of output that is produced
d) there can be unintended inventory depletion
8) When revenues exceed expenditure, the government is running a
a) budget deficit
b) budget surplus
c) trade surplus
d) trade deficit
9) Which of the following will lead to a parallel upward shift in the aggregate expenditure
function?
a) a decrease in government spending
b) an increase in savings
c) an increase in planned investment
d) an increase in the marginal propensity to consume
10) If the marginal propensity to consume is 0,4, a $6 billion increase in government
purchases will cause equilibrium national income to increase by
a) $2,4 billion
b) $6 billion
c) $10 billion
d) $15 billion
PART 2
1) The table below gives income and expenditure figures for the country of AQUALAND
in units of dollars. Answer the questions using the figures below.
Personal consumption expenditure
Net factor payment to ROW
Indirect business taxes
Government purchases
Net Exports
Net private investment
Depreciation
Subsidies
a)
b)
c)
d)
$6,759
9
682
1,743
-370
577
1,257
100
What is the value of GDP for Aqualand?
What is the value of GNP for Aqualand?
What is the value of Net National Product for Aqualand?
What is the value of National Income for Aqualand?
2) The following table contains information on an economy that produces hamburgers and
jeans only.
Year
1983
2001
Price/unit Quantity Price/unit Quantity
Hamburgers $1.00
100
$1.2
150
Jeans
$30
20
$50
30
a) Calculate the nominal and real GDP of 1983 and 2001 taking 1983 as the base year.
b) Is there an economic growth in this economy? Why or why not?
3) You are given the following information concerning a closed economy. MPC is constant
and investment, government spending are determined autonomously. Taxes are constant at a
level of 200. Consumption function is given by the equation C= 200+0,8Yd.
Real GDP
income
(Y)
0
1000
2000
3000
4000
5000
6000
7000
Consumption
C
Planned
investment
(I)
Government
spending (G)
Aggregate
planned
expenditures
(AE)
400
300
300
a) Fill in the blanks.
b) Calculate MPC and MPS.
c) Determine the equilibrium level of income for this economy.
d) If real GDP is 3000 is unplanned inventory investment positive or negative? Predict
how will businesses respond.
e) If real GDP is 7000, is unplanned inventory investment positive or negative? Predict
how will businesses respond
f) At which output level saving is zero?
g) If government spending fell by 200, how much would the equilibrium output level fall?
What is the multiplier? Describe the pressure that would cause the equilibrium output
level to change?
PART 3
State which of the following would NOT be counted as part of the Gross Domestic Product
(GDP) of Turkey. (All transactions take place in Turkey)
a) Sale of a newly manufactured desktop computer for $1,500.
b) The services of a stockbroker for $7,000 a month.
c) Housework performed by a housewife.
d) Sale of $15,000 worth of television sets stolen from Arçelik.
e) Physical capital investment by a firm of $50,000 to replace old machines.
f) A $20,000 donation to charity.
g) The purchase of $15 worth of flour, which a student uses to bake a cake for himself.
h) The services of a painter in painting the family home.
i) The purchase of an AT&T bond.