“The economy is worse than you thought. It is bad enough that the economy sucks. This situation is made worse by easily discoverable distortions in official government statistics which downplay how much it sucks. (It's suckiness?)Econ 251 – Principles of MacroeconomicsExam #1, Fall 20111:30 class Name: All graphs must be labeled and legible and show all work. Good luck! Points off total score: _____1. In which component of United States’ 2011 Gross Domestic Product (GDP), are the following accounted for? (For example, expenditures on French wine are included in import expenditures.) Spell out the name of the component for full credit. If it is not in one of the categories, then write none. a. iPhone4 built in 2011 that have yet to be sold because people would rather purchase iPhone4sb. iPhone4 built in 2010 that have yet to be sold because people would rather purchase iPhone4sc. unemployment benefitsd. Initial offerings of stocks for a start up companye. University of St. Thomas 2011expenditures on building the Anderson Student Centerf. property taxesg. Household expenditures by Minnesotans on tickets to watch the WNBA Championships h. NY Police Department’s expenditures for patrolling areas where protestors are camping out.i. UST tuition payments made by householdsj. U.S. Government expenditures on Brazilian made helicoptersk. Expenditures by a Japanese airline on a U.S. made Boeing Dreamliner aircraftl. Wells Fargo takeover of Wachovia bank in 20112. Answer ONE of the following questions.a. (Complete the sentence) The natural rate of unemployment is the sum of … OR b. What is the correct order of statements? ___ raises Netflix’s cost of production___ shifts Netflix’s supply curve to the left ___ the price for Netflix service rises and the number of subscribers falls___ higher cost for acquiring rights to stream videos over the internet 3. Identify the type of unemployment. (Spell out the word for credit.)a. 3M eliminates 55 factory positions when machinery that is used to make 3M lint rollers gets moved to Mexico. Assume these individuals would have to move Mexico or another part of the country to find employment in a similar factory position. b. A retiree decides to re-enter the labor force after he realizes with the drop in the stock market he does not have enough income to stay retired.c. A construction worker who was hired for the construction season is laid off after Christmas.d. De Beers Diamond company layoffs mine workers because of a 6% drop in world diamond sales in 2007. The biggest hit came from the US where high oil prices reduced consumers’ ability to purchase objects of desire and diamonds are among the first luxury items to be dumped4. Answer ONE of the following two questions.a. When traveling through Nicaragua, I learned if you want to purchase pottery, you should visit San Juan De Oriente. If you want to purchase flowers, visit Katarta, but if you want to bring back a hammock, youshould drive to Tipitapa City. Why I was not surprised to hear that each city specializes in production of one item? Explain using macroeconomic concepts. (2-3 sentences)b. Finland, like many countries, tax imported agricultural products to protect its agricultural sector. Comment on why Finns are hurt from levying a tax on imported food to save agricultural jobs. (1-2 sentences)5. George Washington’s heirs tried to sell Mount Vernon to the U.S. Government and the State of Virginia because they no longer could maintain his home and wanted to protect it for future generations. But both governments declined the offer. Instead Ann Pamela Cunningham raised $200,000 in donations in 1860 to purchase the home and now the Mount Vernon Ladies’ Association runs the estate of George Washington. If the CPI1860 = 26 and CPI2011= 651, what would be the equivalent amount of money raised today? Show all work. 6. AD-AS analysis can be used to show how the recent fall in oil prices will affect the U.S.’s GDP and price level. Make corrections to the graph below so that it is an accurate depiction of the AD-AS analysis. U.S. Oil Market PL Q7. Economic Indicators:a. What is the appropriate statistic to use for business inventories?Levels Percentage Change (Circle one.)b. What is the appropriate statistic to use for initial jobless claims? 1week figures 4 week moving average (Circle one.)c. Explain why this is the appropriate figure to use for initial jobless claims? (1-2 sentences)d. Suppose there is a 20% drop in initial jobless claims. Is this good or bad news for economy?Good Bad (Circle one.) e. Suppose there is a 20% drop in durable good orders. Is this good or bad news for economy?Good Bad (Circle one.) 8. True False Questions T F GDP price index overestimates inflation.T F The entire length of the business cycle in the United States has gotten shorter.T F Mikhail Prokhorov, a Russian billionaire, owns the New Jersey Nets NBA team. As result, the Nets are then part of Russia’s GDP and the US’s GNP.T F When the economy is producing near capacity (i.e., the PPF), then unemployment rate is low and the inflation rate is high. T F The number of U.S. homes foreclosed in 2010 is a flow variable. T F The fallacy of composition is the error of believing a cause-effect relationship between two events that are associated in time. T F Capital per worker is on the vertical axis of the per worker function. T F Advancements in technology shifts the per worker function.T F Suppose a country produces 100 items. If the price of 99 of these items increase, then the price level must have increased. 9. A recent report shows that Brazilian household income (in constant dollars) has been rising. Is the report referring to nominal or real income? Nominal income Real income (Circle one.)10. Listed below are the figures for national income accounts for the United States in the year 2010. All figures are given in nominal terms. You must show all calculations to get full credit.Consumption Expenditures= $10,352Transfer Payments = $1043Investment Expenditures = $1822Government Expenditures = $3002Export Expenditures = $1837Savings = $1871Import Expenditures = $2353a. Calculate nominal GDP.b. What piece of data