Econ 305 Midsample

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ECON 305 MIDTERM

A. Multiple choices

1. __________ Given that air pollution is generated as a byproduct of the production of some goods like chemicals A) GDP is adjusted downward to account for this
B) GDP is adjusted upward to account for this.
C) GDP tends to understate economic welfare.
D) GDP tends to overstate economic welfare.
E) None of the above.

2. __________ Suppose hamburgers cost $1.20 last year and $1.32 this year, and the overall price index (the GDP deflator) rose from 110 last year to 120 this year. How much will 1000 hamburgers contribute to this year's real GDP? A) $1000.

B) $1100.
C) $1200.
D) $1320.
E) Impossible to calculate without additional information.

3.In the very long run we assume that
A)prices are flexible, and, therefore, all markets are in equilibrium at all times
B)the productive capacity of the economy is fixed
C)at least some prices are fixed
D)all of the above are true
E)none of the above are true

4.In an open economy that has a government sector
A)Sp – I = G + TR – TA
B)Sp = (G + TR – TA – I) + NX
C)Sp – I = (G + TR – TA) + NX
D)I – Sp = (G + TR – TA) – NX
E)none of the above are true

5.Assume that GDP = 480, consumption = 340, savings = 40, net exports = –12, and government purchases = 120. Which of the following is true?
A)disposable income is 380
B)investment is 32
C)the budget deficit is 32
D)only A) and B)
E) only A) and C)

6.In the long run the Aggregate Supply curve is vertical because A)full employment output depends on both the production function and the price level B)full employment output depends on the price level, but not on the production function C)full employment output depends on the production function, but not on the price level

D)there is no unemployment in the Classical model
E)both C) and D) are correct

7.According to the quantity equation
A)V =PM / T
B)V = MT / P
C)V = PT / M
D)V = 1 / PTM
E)none of the above

8.Which of the following is NOT a source of economic growth?
A)growth in consumption expenditures
B)growth in labor inputs
C)growth in capital inputs
D)improved technological efficiency
E)growth in the stock of knowledge

9.Assume a production function with constant returns to scale, labor's share of income at 0.7, and capital's share at 0.3. If labor grows at 4% and capital grows at 3%, how many years would it take to double the current level of output if no technological advances are made?

A)7
B)10
C)19
D)23
E)33

10.In general
A)a country that has a balance of payments deficit will have an increase in foreign reserves B)a country that has a balance of payments surplus will have a decrease in foreign reserves C)a country that has a balance of payments deficit will have a reduction in foreign reserves D)a country that has a balance of payments surplus will have an increase in foreign reserves

E)both C) and D) are correct

11.The theory of purchasing power parity states that
A)in the short run, the nominal exchange rate moves primarily as a result of differences in price level behaviour between two countries B)in the long run, the nominal exchange rate moves primarily as a result of differences in the price level behaviour between two countries C)in the short run, the nominal interest rate moves primarily as a result of differences in the price level behaviour between two countries D)in the long run, the nominal interest rate moves primarily as a result of differences in the price level behaviour between two countries

E)none of the above

12.The output gap equals
A)potential output – full employment output
B)actual output – potential output
C)potential output – actual output
D)full employment output – potential output
E)none of the above

13.Which of the...
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