PART I. ______ PART II. 1. _____ 2. _____ X. CR. _____ TOTAL _______ GRADE __SAMPLE SECOND EXAMECON 123 V1 NAME _______________________Please read all instructions carefully. Put your name on the scantron as well as on this sheet. Good luck! TOTAL POINTS = 100.PART I. MULTIPLE CHOICE. Answer all multiple choice questions on the BLUE SIDE of the scantron. Using a #2 pencil, darken the circle by the letter which bestanswers each question. 1. The three major macroeconomic problems are:a. Debt, deficits, and taxation.b. Unemployment, inflation and taxation.c. Unemployment, falling production, and deficits.d. Unemployment, falling production, and inflation.2. Which of the following is NOT a direct consequence of unemployment?a. Higher inflation.b. Individual hardship.c. Lost output and production.d. All of the above are consequences of unemployment.3. Which of the following types of unemployment is voluntary, where the person chooses to leave her job?a. Cyclical unemployment.b. Frictional unemployment.c. Structural unemployment.d. None of the above.4. Lee lost her job because her employer moved his operations to China. Ramon resigned from his job to look for work closer to his family.a. Lee’s unemployment is cyclical and Ramon’s is frictional.b. Lee’s unemployment is structural and Ramon’s is cyclical.c. Lee’s unemployment is structural and Ramon’s is frictional.d. Lee’s unemployment is frictional and Ramon’s is structural.5. The labor force consists of all persons:a. Who are working regardless of their ages.b. Capable of working regardless of their ages.c. 16 years of age and older who are working.d. 16 years of age and older who are working or actively seeking work.6. An unemployment rate of six percent means that six percent of the:a. Labor force is voluntarily unemployed.b. Labor force is involuntarily unemployed.c. Labor force is out of work and actively seeking employment.d. Population is out of work and actively seeking employment.7. The natural rate of unemployment occurs when unemployment is:a. Zero.b. A level that includes only the frictionally and structurally unemployed.c. A level that includes only the structural and cyclically unemployed.d. A level that includes only the frictionally unemployed.8. An economy experiences inflation when:a. Prices are high.b. Prices are increasing.c. The purchasing power of money is increasing.d. All of the above.9. A person whose paycheck grows at 6% when the inflation rate is 4% would experience:a. A decrease in money (nominal) income and in real income.b. An increase in money (nominal) income and in real income.c. A decrease in money (nominal) income and an increase in real income.d. An increase in money (nominal) income and a decrease in real income.10. Which of the following is most likely to be hurt by inflation?a. The average retired person living on past savings.b. The average lender.c. The average wage-earner (worker).d. Both a and b.2USE THE INFORMATION IN THE TABLE BELOW TO HELP YOU ANSWER QUESTIONS 11, 12, and 13.YEARPRICE OR VALUE OFMARKET BASKET PRICE INDEX1 $2002 $4003 $60011. If year 1 is the base year, the price index number for year 2 is:a. 100.b. 200.c. 400.d. None of the above.12. If year 1 is the base year, the price index number for year 3 is:a. 100.b. 200.c. 600.d. None of the above.13. The rate of inflation between year 2 and year 3 is:a. 300%.b. 100%.c. 50%.d. None of the above.14. Rates of inflation can be calculated from:a. The consumer price index.b. The producer price index.c. The GDP deflator.d. All of the above.15. The base year in a price index is always:a. The first year in the index.b. Given a value of 0.0.c. The year against which prices in other years are compared.d. All of the above.316. Gross Domestic Product (GDP) measures the value of all:a. Goods and services sold in one year.b. Goods and services produced in one year.c. Finished (final) goods and services sold in one year.d. Finished (final) goods and services produced in one year.17. Money (nominal) GDP measures the value of production:a. Adjusted for inflation.b. Relative to potential output.c. Relative to the output of other nations.d. In terms of prices at the time of production.18. Real GDP measures the value of production:a. Adjusted for inflation.b. Relative to potential output.c. Relative to the output of other nations.d. In terms of prices at the time of production.19. Total, or aggregate, spending is the combined spending for new goods and services of all:a. Households.b. Households and businesses.c. Households, businesses, and government units.d. Households, businesses, government units, and foreign buyers.20. Which of the following has no direct impact on consumption spending?a. An increase in the personal income tax.b. An increase in the value of stocks.c. A decrease in interest rates.d. A change in exports.21. Business investment would likely decrease following an increase in:a. Interest rates.b. Profit expectations.c. Personal consumption expenditures.d. All of the above.422. The recurring periods of increasing and decreasing production that the economy experiences are called:a. Business cycles.b. Phases of growth and decline.c. Fluctuating cycles.d. Periodic cycles.USE THE DIAGRAM OF THE BUSINESS CYCLE BELOW TO HELP YOU ANSWER QUESTIONS 23 AND 24.Real GDP Amaximum B D minimum C 1970 2010 Year23. In which phase of the business cycle is point A?a. Peak.b. Recovery.c. Inflationary.d. Pre-contractionary.24. The unemployment rate would most likely be decreasing in the phase of the business cycle indicated by:a. Point B.b. Point C.c. Point D.d. The unemployment rate does not change over the business cycle.525. According to the aggregate demand – aggregate supply model, which of the following will NOT increase the level of real output in the LONG-RUN.a. An increase in labor productivity.b. An increase in the capital stock.c. An increase in aggregate demand.d. All of the above will increase the level of real output in the long-run.26. Which of the following panels illustrates positive long-run economic growth? INFL MRAS1 MRAS2 INFL MRAS2 MRAS1 y y PANEL A PANEL B INFL SRAS1 SRAS2 INFL SRAS2 SRAS1 y y PANEL C PANEL Da. Panel A.b. Panel B.c. Panel C.d. Panel D.27. Which of the following is NOT a function of money?a. Produce goods and services.b. Provide a method for storing wealth.c. Provide a measure of value for every