Principles of Macroeconomics Midterm Exam Name Recitation 3 pts Exam Version 14 F M1 Time Limit 60 minutes Guidelines READ THEM Exams written in pencil will not be regraded You must write in ink if you might want a regrade in the future Illegible answers will receive no credit You must stay seated for the last 10 minutes of the exam Each page may have its own directions Follow directions carefully For full credit answers must be clearly justified Graphs must be completely LABELED and math work shown Do not write too much One sentence per point is a good estimate but is NOT a rule i e do not complain if you write one sentence for a one point question and do not get full marks There are no partial marks given for multiple choice The following WILL BE CONSIDERED CHEATING Having any calculator out NO CALCULATORS ALLOWED Having your cell phone out Having any notes out Collaborating with other students This exam is 7 pages not including this front page numbered 1 7 Good luck Exam Record Part1 30 points Part2 20 points Incorrect Section 3 points Total 50 points Principles of Macroeconomics Fall 2014 Midterm Exam Name Part I 30 points Answer all questions in this part 1pt 1 In steady state output a b c d 1pt 2 Which of the following transactions is included in GDP in 2014 Assume all transactions take place in Minneapolis a b c d 1pt 1 1 0 10x10 x20 1 1 0 10x10 1 1 10 0 10 10 0 10 1 1 0 10 10 4 Which of the following is most likely to encourage physical capital investment a b c d 1pt Sam purchases a used economics textbook for 100 on September 6 2014 Frank s Fine Fixtures sells a floor lamp for 125 on February 10th 2014 Homemade Bread Company buys 150 worth of flour on April 5th 2014 Jennifer makes handmade bracelets worth 20 at home on August 28 2014 3 The interest rate is 10 The future value of 1 in 10 years is a b c d 1pt Grows Stays the same Shrinks Not enough information High High High High savings rates investment tax credits interest rates GDP growth 5 Suppose GDP per capita for a country grows at 3 5 per year In about how many years does its GDP per capita double a b c d 3 years 10 years 20 years 70 years 1pt 6 The a b c d 1pt 7 Which of the following transactions is included in GNP of Turkey in 2014 a b c d interest rate is 3 5 Tim has 1000 After about how many years will he have 1 000 000 20 years 200 years 2000 years 20 000 years A Turkish citizen Serdar teaches Economics and earns salary in US on January 2014 A US citizen Mike produces bread and sells it in Turkey on April 2014 A US citizen John teaches English and earns salary in Turkey on March 2014 A Turkish citizen Seyma produces tomatoes at her farm in Minnesota and sells them to a supermarket in Minnesota on December 2013 E1 1102 Fall2014 Midterm 1 1pt GROWTH function Goal Seek function FORECAST function Scenario Analysis function A prolonged period of depressed output When a business cycle reaches its peak When unemployment decreases dramatically Negative growth for 1 quarter 13 Which of the following is true a b c d 1pt the the the the 12 What is the best definition of a recession a b c d 1pt Prices stop growing Output stops growing Capital stock stops growing Depreciation equals investment 11 If as in the appendix to chapter 7 you wanted to find how long it takes to earn 1 000 000 using compound interest which function in Excel would you use a b c d 1pt Institutions Political stability Corruption Human capital 10 Which of the following is not necessarily true about steady state a b c d 1pt The rate of depreciation of capital The price level in the economy The savings rate None of the above 9 Which of the following cannot help a country to increase its economic growth a b c d 1pt Name 8 When looking at the Solow Growth Model which of the following does not help determine the steady state value of Y a b c d 1pt Page 2 of 7 An An An An increase increase increase increase in in in in investment investment investment investment rate rate rate rate decreases output level and creates a permanent lower growth rate increases output level and creates a permanent lower growth rate increases output level and creates a temporary higher growth rate decreases output level and creates a temporary lower growth rate 14 Which of the following is a problem with using real GDP per capita as a yardstick of living standards a b c d Doesn t include externalities in an economy Includes bombs made but not the health of a nation s citizens Income distribution is ignored All of the above E1 1102 Fall2014 Midterm 1 1pt Name 15 Which of the following defines crowding out effect a b c d 1pt Page 3 of 7 Decrease in interest rate as a result of higher savings Increase in investment as a result of lower interest rate Decrease in private spending as a result of higher government borrowing Increase in private spending as a result of higher government borrowing 16 Which of the following is true about trade a A country need not have an absolute advantage in anything to benefit from trade b Comparative advantage is the ability of a country to produce a good at higher opportunity cost than another country c If a country has absolute advantage in production of shirts then the country must have comparative advantage in production of shirts as well d Absolute advantage is the ability of a country to produce a good using more inputs than another country 1pt 17 Which of the following is a definition of consumer surplus a Difference between the maximum a producer is willing to pay and the price the producer actually pays for a good b Difference between the maximum a consumer is willing to pay and the price the consumer actually pays for a good c Difference between the maximum a producer is willing to sell for and the price the producer receives for a good d Difference between the maximum a consumer is willing to sell for and the price the consumer receives for a good 1pt 18 Which describes best the US balance of trade a b c d 1pt 19 Roughly how many Indians live at the same standard of Europeans and Americans a b c d 1pt 100 100 000 100 million 1 billion 20 What is the definition of marginal product of capital a b c d 1pt The US imports more than it exports The US exports more than it imports The US imports and exports the same amount There isn t any data on this The The The The additional additional additional additional output capital capital output …