Principles of Macroeconomics Midterm Exam Name Answer Key Recitation 3 pts Exam Version 14 F M1MU 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 6 pages not including this front page numbered 1 6 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 Answer Key Part I 30 points Answer all questions in this part 1pt 1 Nominal GDP is 120 billion in 2007 and 160 billion in 2006 The GDP deflator is 80 in 2007 and 100 in 2006 Between 2006 and 2007 a b c d 4 1pt the the the the GROWTH function Goal Seek function FORECAST function Scenario Analysis function the steady state level of capital the steady state level of capital and increases increases increases decreases decreases increases decreases decreases 5 According to the life cycle theory of savings when are people most likely to borrow a 4 b c d 1pt The most important biggest component of GDP Flows of goods and services into the U S Less than imports in terms of dollar amount Not included in GDP 4 In the Solow Model a decrease in the investment share and output A decrease in the depreciation rate output a b c 4 d 1pt and the price level both rose rose and the price level fell fell and the price level rose and the price level both fell 3 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 4 c d 1pt output output output output 2 For the United States exports are a b c 4 d 1pt Real Real Real Real Youth Middle Age Old age It depends 6 What are developed countries most dependent on for growth a b c 4 d More buildings More people More ideas All of the above E1 1102 Fall2014 Midterm 1MU 1pt Nominal GDP per capita Real GDP Real GDP per capita Nominal GDP Lower equilibrium interest rate and lower savings Lower equilibrium interest rate and higher savings Higher equilibrium interest rate and lower savings Higher equilibrium interest rate and higher savings Increase in private spending as a result of higher government borrowing Decrease in private spending as a result of higher government borrowing Decrease in interest rate as a result of higher savings Increase in investment as a result of lower interest rate 12 Which of the following about the stock market is true a 4 b c d 1pt cheese sold to a supermarket customer child care provided by parents the market value of cheese used to produce pizza the value of the used car you sell to your friend 11 Which of the following defines crowding out effect a b 4 c d 1pt includes includes includes includes 10 Which of the following is the result of less optimistic investor behavior on the loanable funds market a 4 b c d 1pt It It It It 9 Which of the following is the best measure of the economic growth a b c 4 d 1pt A US citizen John teaches English and earns salary in Turkey in January 2014 Toyota produces car in Japan and exports it to US in May 2014 An Ecuadorian citizen Fausto purchases a pizza from a Subway in Minneapolis in October 2014 A US citizen Harold purchases Mikes old car in September 2014 8 Which of the following statements about GDP is true a 4 b c d 1pt Name Answer Key 7 Which of the following transactions is included in GDP of US in 2014 a b c 4 d 1pt Page 2 of 6 Arbitrage means that returns of two equally risky assets should be the same A T bill is a type of stock A stock is a sophisticated IOU that documents who owns how much and when payments come due It is included in GDP 13 Which of the following is way of measuring GDP I National income approach II Standard of living approach III Factor income approach IV Economic growth approach a b c d 4 I only II and III I and IV I and III E1 1102 Fall2014 Midterm 1MU 1pt output capital output capital resulting resulting resulting resulting from from from from using one less unit of capital one additional unit of output using an additional unit of capital one less unit of output Increasing returns Diminishing returns Constant returns None of the above Why people save money for retirement The reason inflation is stable Consumers spending everything they earn Why interest rates are low As interest rate increases investment becomes more attractive As interest rate decreases investment becomes less attractive As interest rate increases investment becomes less attractive None of the above 20 Which of the following is a direct source of funds for the shadow banking sector a b c d 4 1pt additional additional additional additional 19 Why is the demand curve for borrowing downward sloping a b c 4 d 1pt The The The The 18 Consumption smoothing best describes a 4 b c d 1pt years years years years 17 Marginal product of capital in the Solow growth model is subject to what a b 4 c d 1pt 10 20 30 40 16 What is the definition of marginal product of capital a b c 4 d 1pt Everyone used to be poor Nigeria has had phenomenal growth over the past 50 years Natural resources long run growth South Korea stagnated in the 80s 15 About how long would a country with 3 5 growth take to double a b 4 c d 1pt Name Answer Key 14 Which of the following is a key fact about growth a 4 b c d 1pt Page 3 of 6 Consumer savings Government borrowing Proceeds from organised crime Hedge funds 21 GDP deflator does NOT depend on which of the following a b c 4 d Real GDP Nominal GDP Population Price Level E1 1102 Fall2014 Midterm 1MU 1pt GDP GDP GDP GDP divided divided divided divided by by by by total work force total population working age population price level 27 The Solow growth model predicts which of the following …