University of Oregon Chandler Lester Department of Economics Fall 2019 October 30, 2019 Version A

Practice Midterm Exam

Economics 202 Principles of Macroeconomics

Instructions:

Please clear your desk of everything except for a pen or pencil and non-programmable cal- culator.

Please write your name and Student ID number on the front cover of this examination, and write your answers in the spaces provided. If you need extra paper, please ask me for blank paper that may be attached to this examination at its completion. DO NOT use your own paper.

You make keep this exam paper so that you know the answers you write down. Please submit all of your answer on the scantron. Incorrectly marked scantrons will not be regraded.

This the Exam consists of 40 Multiple Choice questions. Choose a SINGLE answer to each question. Correct answers are worth 2.5 points each, whereas incorrect or blank answers are worth zero points.

The maximum possible score on the whole exam is 100 points.

NAME:

STUDENT ID#:

Multiple Choice questions.

Circle the letter corresponding to the correct answer for each of the following multiple choice questions. Also, mark the corresponding bubble on your scantron.

Suppose we have an economy that only has three goods: Runescape subscriptions, hoodies, and hot chocolate. Using the tables below calculate the following GDP measurements.

Quantities 2012 2019

Runescape subscriptions 100 100 Hoodies 99 80 Hot chocolate 400 500

Prices 2012 2019

Runescape subscriptions 30.00 40.00 Hoodies 18.00 20.00 Hot chocolate 2.00 3.50

1. What was the nominal GDP in 2012?

A. 2,282

B. 5,582

C. 5,582

D. 7,530

E. 6,380

2. What was the nominal GDP in 2019?

A. 7,350

B. 5,582

C. 7,530

D. 5,440

E. 6,380

3. What was the real GDP in 2019 using 2012 prices?

A. 7,350

B. 5,582

C. 7,530

D. 5,440

E. 6,380

4. Which of the following is NOT true regarding The Bretton Woods system:

A. was abandoned by the United States in the early 1970s.

B. created a system in which most countries used floating exchange rates and not pegged exchange rates.

C. required member countries to declare a par value for their currency in terms of the US dollar.

D. established the World Bank and the IMF.

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5. Which of the following will cause an increase in the amount of money that one wishes to hold?

A. An increase in the interest rate

B. A reduction in the interest rate

C. A reduction in income

D. None of the above

6. The non-institutionalized civilian population is 250 million, of which 100 million are employed and 10 million are unemployed. Based on this information, the labor force participation rate is

A. 36%.

B. 40%.

C. 44%.

D. 90.1%.

E. 66%.

7. We are interested in long-term growth primarily because it brings

A. higher price levels.

B. lower price levels.

C. higher standards of living.

D. trade wars with our trading partners.

8. In 2011, Armenia had a real GDP of $4.21 billion. In 2012, real GDP was $4.59 billion. What was Armenia’s economic growth rate from 2011 to 2012?

A. 0.38 percent

B. 9.0 percent

C. 3.8 percent

D. 0.09 percent

9. Which of the following is used to calculate the standard of living?

A. real GDP/population

B. ((real GDP in the current year - real GDP in previous year)/real GDP in previous year) ⇥ 100

C. the one-third rule

D. real GDP/aggregate hours

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10. The term capital, as used in macroeconomics, refers to

A. the amount of money that someone can invest in a new venture.

B. the amount of money a firm can raise in the stock market.

C. physical capital.

D. All of the above answers are correct.

11. At the beginning of the year, Tom’s Tubes had a capital stock of 5 tube inflating ma- chines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom’s capital stock at the end of year equals

A. 1 machine.

B. 2 machines.

C. 3 machines.

D. 6 machines

12. Which of the following does NOT describe a function of money?

A. unit of account

B. hedge against inflation

C. medium of exchange

D. store of value

13. The most direct way in which money replaces barter is through its use as a

A. medium of exchange.

B. recording device.

C. store of value.

D. unit of account.

14. Gross domestic product is the total produced within a country in a given time period.

A. market value of all final and intermediate goods and services

B. market value of all goods and services

C. amount of final and intermediate goods and services

D. market value of all final goods and services

15. Which of the following is a final good?

A. the memory chips in your new smart phone

B. a share of IBM stock

C. flour purchased at the store to bake cookies

D. flour used by the bakery to bake cookies

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16. Suppose the United States spends more on foreign goods and services than foreigners spend on our goods and services and the United States sells no foreign assets. Then the

A. United States must borrow an amount equal to national saving.

B. United States must borrow an amount equal to imports minus exports.

C. rest of the world may or may not finance the U.S. trade deficit.

D. United States must borrow an amount equal to consumption expenditure plus investment.

17. In January, suppose that a share of stock in Meyer, Inc. had a price of $50 and that each share entitled its owner to $2 of Meyer, Inc.’s profit. During the year, the price of a share of Meyer’s stock rose to $100. The interest rate paid on the share in January was percent.

A. 2

B. 0.02

C. 4

D. 0.04

18. The present value of $200 two years from now when the interest rate is 7 percent is

A. $207

B. $214

C. $187

D. $175

19. Double counting (counting the same thing twice) in GDP accounting is avoided by not including

A. net exports.

B. intermediate goods.

C. illegal activities.

D. depreciation.

20. In the short run, when the Fed decreases the quantity of money

A. bond prices fall and the interest rate rises.

B. bond prices rise and the interest rate falls.

C. the demand for money increases.

D. the supply of money curve shifts rightward.

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interest rate= ($ pay out / price)*100
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nominal interest rate up, bonds prices fall
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21. An economic model is

A. a generalization that summarizes all the normative assumptions we make about a particular issue.

B. a description of some aspect of the economic world that includes only those features of the world that are needed for the purpose at hand.

C. a statement that describes how the world should be.

D. a collection of facts that describe the real world.

22. If we compare the four sources of spending in the economy we see that

A. household consumption is the smallest.

B. government expenditure is the largest.

C. business investment is the largest.

D. household consumption is the largest.

23. Which of the following are equal to one another? I. aggregate production II. aggregate expenditure III. aggregate income

A. I equals II, but not III.

B. I equals III, but not II.

C. II equals III, but not I.

D. I equals II equals III.

24. Gross domestic product can be calculated

A. either by valuing the nation’s output of goods and services or by valuing the income generated in the production process.

B. by adding up the personal consumption of all members of the society.

C. by adding up the value of all intermediate goods used in the economy.

D. by adding up the income tax returns of all members of the society.

25. If the price level increases, but workers’ money wage rates remain constant,which of the following is TRUE? I. The quantity of labor demanded will increase. II. The real wage rate will decrease. III. The demand for labor curve shifts rightward.

A. I only

B. I and II

C. II and III

D. I, II and III

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26. The labor force participation rate

A. does not change when the real wage rate changes.

B. decreases as the real wage rate rises.

C. increases as the real wage rate increases.

D. has an inverse e↵ect of the supply of labor.

27. If the real wage rate is such that the quantity of labor supplied equals the quantity of labor demanded

A. a full-employment equilibrium occurs.

B. actual GDP equals potential GDP.

C. the supply curve of labor is vertical.

D. Both answers A and B are correct.

28. When the population increases with no change in labor productivity, employment and potential GDP .

A. decreases; decreases

B. increases; increases

C. decreases; increases

D. increases; decreases

29. Labor productivity is defined as

A. total output attributable to labor.

B. total real GDP.

C. the growth rate of the labor force.

D. real GDP per hour of labor.

30. A decrease in decreases the demand for money.

A. the discount rate

B. real GDP

C. the interest rate

D. the quantity of money

31. When the nominal interest rate rises, the quantity of money demanded decreases because

A. people will buy fewer goods and hence hold less money.

B. the price level also rises and people decrease their demand for money.

C. people shift funds from interest-bearing assets into money.

D. people shift funds from money holdings to interest-bearing assets.

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if population up then make people can work. Employment increases. potential GDP up.
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32. Human capital is the

A. machinery used by humans to produce GDP.

B. technology used by humans to produce GDP.

C. skill and knowledge accumulated by humans.

D. plant and equipment produced by humans and not by machines.

33. On-the-job-training is an example of

A. increasing labor force participation.

B. investment in human capital.

C. investment in physical capital.

D. technological change.

34. The view that population growth occurs when real GDP per person exceeds the amount necessary to sustain life is part of the

A. classical growth theory.

B. modern theory of population growth.

C. neoclassical growth theory.

D. new growth theory.

35. The neoclassical growth theory says, in part, that

A. a population explosion driven by economic growth will end economic growth.

B. technological change leads to economic growth.

C. the di↵erences in nation’s growth rates will persist indefinitely.

D. technology does not play a role in economic growth.

36. If you lend a dollar for a year and at the end of the year the price level has risen by 10 percent

A. the purchasing power of your loan has risen over the year regardless of the interest rate at which you lent it.

B. the purchasing power of your loan has remained constant over the year regard- less of the interest rate at which you lent it.

C. you must have earned a nominal interest rate of 10 percent to maintain the purchasing power of your loan.

D. you must have earned a nominal interest rate of 5 percent to maintain the purchasing power of your loan.

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37. People know that the inflation rate will increase from 3 percent to 5 percent. As a result

A. the nominal interest rate falls by 2 percentage points.

B. the nominal interest rate is constant.

C. the nominal interest rate rises by 2 percentage points.

D. the real interest rate rises by 2 percentage points.

38. The expected profit from an investment will change with

A. a change in the real interest rate.

B. a change in technology.

C. Both A and B are correct.

D. Neither A nor B is correct.

39. A rise in the real interest rate

A. decreases the demand for loanable funds.

B. increases the demand for loanable funds.

C. decreases the quantity of loanable funds demanded.

D. increases the quantity of loanable funds demanded.

40. According to the ”Lie that saved Brazil” (part two of the podcast on money,) inflation in Brazil began due to:

A. Printing too much money

B. Unstable currency exchanges

C. Importing too much

D. Low Savings

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real = nominal - inflation 0 = nominal - inflaion
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real interest rate
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