Economics 102 Student Name : 3/29/2007 Section # : Second Midterm TA Name : Version 1DO NOT BEGIN WORKING UNTIL THE INSTRUCTOR TELLS YOU TO DO SO.READ THESE INSTRUCTIONS FIRST.You have 50 minutes to complete the exam. The exam consists of 10 binary choice and 20 multiplechoice questions. Each binary choice question is worth 2 points and each multiple choice question isworth 4 points for a total of 100 points. Please fill in your name, student ID number, number of yourdiscussion section, and version number correctly. Please answer all questions on the scantron sheetwith a #2 pencil. No cell phones or formula sheets are allowed. PICK THE BEST ANSWER FOR EACH QUESTION. How to fill in the scantron sheet: 1. Print your last name, first name, and middle initial in the spaces marked "Last Name," "First Name," -,and "MI." Fill in the corresponding bubbles below. 2. Print your student ID number in the space marked "Identification Number." Fill in the bubbles. 3. Write the number of the discussion section you are enrolled in under "Special Codes" spaces ABC, andfill in the bubbles. You can find the discussion numbers below on this page. 4. Write the version number of your exam booklet under "Special Codes" space D, and fill in the bubble.The version number is on the top of this page. 5. If there is an error on the exam or you do not understand something, make a note on your exam bookletand the issue will be addressed AFTER the examination is complete. No questions regarding the examcan be addressed while the exam is being administered. 6. When you are finished, please get up quietly and bring your scantron sheet and this exam booklet tothe place indicated by the instructors. Discussion sections are as follows:Nonarit Bisonyabut (South)302 3:30 W 6224 SOC SCI311 8:50 F 6232 SOC SCI313 9:55 F 114 INGRAHAM315 12:05p F 122 INGRAHAM317 1:20p F 23 INGRAHAMRebecca Lessem 309 3:30p R 6232 SOC SCI319 2:25p R 4322 SOC SCIHaixi Li301 3:30 W 6310 SOC SCI304 12:05p W 6224 SOC SCI308 2:25p W 6322 SOC SCI310 3:30p R 225 INGRAHAM Yuya Takahashi306 1:20p W 52 BASCOM307 2:25p W 4322 SOC SCI312 8:50 F 6112 SOC SCI314 9:55 F 214 INGRAHAMXiao Wang303 12:05 W 6310 SOC SCI305 1:20p W 6322 SOC SCI316 12:05p F 6232 SOC SCI318 1:20p F 4322 SOC SCIBinary Choice1. An increase in the corporate profits tax rate will cause the interest rate to _____. a. Increaseb. Decrease2. When the wage equals $10, the demand for labor is 240 hours and the supply of labor is 60 hours. When the wage rate is $20, the demand for labor is 120 hours and the supplyof labor is 200 hours. Based on this information, we can say that the equilibrium wage rate is ______ than $10.a. Higherb. Lower3. Which of the followings terms describes an economy with a decrease in the CPI from one year to the next?a. deflationb. stagnation4. If the capital stock in a country decreases and there is no change in technology, what will happen to labor productivity? a. It will decrease.b. It will increase.5. The Classical Model predicts that national savings will equal domestic investment in aclosed economy.a. Trueb. False6. The labor demand curve indicates the minimum wage for which firms will hire different quantities of labor. a. Trueb. False7. Holding everything else constant, if government spending decreases, but tax revenues do not change, then the interest rate will ________.a. increaseb. decrease8. What do we know for certain if we observe that the CPI in 2001 is equal to 100?a. This CPI was calculated using 2001 as the base year.b. The cost of the market basket in 2001 is the same as the cost of the market basket in the base year.9. Define the equilibrium aggregate price level to be a price such that the money demandand money supply are equal. If the current price is lower than the equilibrium aggregate price level, then spending will ________ and consequently prices will increase until they reach the equilibrium level. a. Increaseb. Decrease10. If there is a decrease in labor supply, an increase in the capital stock, and labor demand is held constant, then labor productivity will always increase.a. Trueb. FalseMultiple Choice11. Consider a labor market and an aggregate production function. In which of the following situations can we absolutely determine the direction of the change in labor productivity? a. Labor supply shifts leftward and labor demand shifts to the right.b. Labor supply shifts leftward, technological capability is lowered, and the capital stock decreases.c. Labor demand shifts to the right and the capital stock increases. d. Labor supply shifts leftward and technology improves.12. Assume that, when calculating the CPI, we use the consumption of the economy in 2004 as our market basket. Oranges were consumed in 2004 and therefore are part of the market basket. In 2005, oranges in Florida were seriously damaged by insects. As a result, between 2004 and 2005, the price of oranges increased by a factor of 10. Due to this price increase, the quantity of oranges traded decreased by 98%. Let INF1 be the inflation rate calculated using CPI values and let INF2 be the inflation rate calculated using GDP deflators. Which of the following statements is true?a. INF1 will overestimate the effect of inflation on people's standard of living, while INF2 will underestimate the effect of inflation on people's standard of living.b. INF1 will underestimate the effect of inflation on people's standard of living, while INF2 will overestimate the effect of inflation on people's standard of living.c. Both INF1 and INF2 will underestimate the effect of inflation on people's standard of living.d. Both INF1 and INF2 will overestimate the effect of inflation on people's standard of living.13. What is the most important determinant of long-run economic growth?a. Inflationb. The unemployment rate c. Government spendingd. Labor productivity14. If the aggregate production function for a country is( ) 2Y f L L= =, how will labor productivity change as labor increases?a. It will increase.b. It will decrease.c. There will be no change.d. There is not enough information to determine the change in labor productivity.Use the following information to answer the next two questions:Consider the market for loanable funds in a closed economy. The business demand for funds is given by1122r I= -,
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