ECON 1100 – Global Economics (Section 05) Exam #2 – Summer 2011 (Version A) Multiple Choice Questions (212 points each): 1. The Gini-Coefficient provides a quantitative measure of A. the level of economic corruption within a society. B. the fraction of the workforce that is currently unable to find a job. C. income equality/inequality within a society. D. the rate at which prices are increasing in an economy over time. 2. During the past six decades, inflation rates in the U.S. (reported on an annual basis) were A. relatively high from 1949 through 1972, then relatively low from 1973 through 1995, and finally relatively high from 1996 through 2010. B. relatively low from 1949 through 1967, then relatively high from 1968 through 1982, and finally relatively low from 1983 through 2010. C. relatively high from 1949 through 1978, but relatively low from 1979 through 2010. D. relatively low from 1949 through 1986, but relatively high from 1987 through 2010. 3. Bobby owns a one of a kind “Kitty Karry-All” doll. His reservation price as a seller of this item is $20. Cindy’s reservation price as a buyer of this item is $120. If Bobby sells this doll to Cindy, the resulting Social Surplus would be equal to A. $50. B. $100. C. $140. D. None of the above answers are correct, since we need to know the “transaction price” in order to determine the magnitude of Social Surplus from the trade. 4. _____________________ refers to the production of goods and services, valued in each period according to current period prices. A. Real GDP B. Real GDP per capita C. Nominal GDP D. Nominal GDP per capita 5. The present economic system of Germany would be most accurately described as A. a pure Capitalist system. B. a pure Communist system. C. a Mixed Economy. D. a pure Socialist system.6. Suppose that between 2012 and 2015 the Unemployment Rate in Japan decreased from 9.6% to 8.1% while the inflation rate increased from 1.1% to 3.4%. It follows that the value of the Misery Index in Japan in 2015 would be ______________________ the value of the Misery Index in Japan in 2012. A. less than B. exactly equal to C. greater than D. None of the above answers are correct, since we must know the value of per capita GDP in order to determine the value of the Misery Index. 7. Demand A. refers to the number of units of a good that firms are willing to sell at the equilibrium price. B. refers to the entire relationship between the price of a good and the number of units that consumers are willing and able to buy, all other factors fixed. C. provides a summary of the behavior of buyers in a market. D. More than one (perhaps all) of the above answers is correct. 8. Which of the following is a basic characteristic of Capitalism? A. The government decides what mix of goods/services businesses will produce. B. Factors of production are privately owned and operated for a profit. C. Consumption goods are distributed to households on the basis of “need.” D. More than one (perhaps all) of the above answers is correct. 9. Focusing on the “household at the 40th Percentile of earned income” in the United States, over the past three decades the “real income” of the household at this cutoff level A. increased from $19,650 to $25,109 between 1980 and 1989, but then decreased to $21,312 by 2007. B. increased from $41,950 to $45,207 between 1980 and 1989, and then further increased to $49,510 by 2007. C. decreased from $38,150 to $37,905 between 1980 and 1989, and then further decreased to $32,230 by 2007. D. decreased from $55,253 to $49,105 between 1980 and 1989, but then increased to $65,847 by 2007. 10. When purchasing a new car last year, Ralph chose to buy a hybrid vehicle partly because doing so gave him an income tax credit which reduced his state income taxes by $1,000. This observation illustrates how the behavior of an individual can be influenced by A. a material incentive. B. moral persuasion. C. corruption. D. coercion.11. The Phillips Curve A. proves that a highly progressive tax structure reduces incentives for high income individuals to work. B. illustrates the short term tradeoff between unemployment and inflation that an economy faces. C. graphically illustrates how total societal income is distributed over different segments of society. D. directly explains why the unemployment rate will continue to increase even when an economy begins to recover from a recession. For Questions 12 and 13, consider a society facing the tradeoffs between “Consumption Goods” and “Capital Goods” which are illustrated by the Production Possibilities Curves below. The curve labeled “1987 PPC” illustrates the PPC of this society in 1987. In 1987 this society chose “Point A” on this curve. As a result, by 2011 the society faced the PPC labeled “2011 PPC.” 12. The “outward shift” of the PPC (from “1987 PPC” to “2011 PPC”) which occurred between 1987 and 2011 could be best described as A. Economic Growth. B. Inflation. C. a Recession. D. an increase in income inequality. 13. If this society had instead chosen “Point B” in 1987, then the relevant PPC in 2011 would A. be an upward sloping line passing through the origin. B. lie somewhere below the curve labeled “2011 PPC” (i.e., be closer to the origin than the curve labeled “2011 PPC”). C. lie exactly on the curve labeled “2011 PPC.” D. lie somewhere beyond the curve labeled “2011 PPC” (i.e., be further from the origin than the curve labeled “2011 PPC”). Capital Goods Consumption Goods 2011 PPC 0 1987 PPC B A 014. __________________ is the subfield of economics that compares the structure and performance of different types of economic organization. A. Comparative Economic Systems B. Macroeconomics C. Public Choice D. The Structure-Conduct-Performance Paradigm 15. Suppose that the Lorenz Curve for Brazil in 2011 lies completely below the Lorenz Curve for Germany in 2011. This implies that A. incomes are distributed more equally in Germany than in Brazil. B. incomes are distributed more equally in Brazil than in Germany. C. Per Capita Incomes are higher in Germany than in Brazil. D. Per Capita Incomes are higher in Brazil than in Germany. 16. Which of the following demonstrates the “Law of Demand”? A. Melissa chooses to sell more donuts at $6.25 per dozen than she
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