Principles of Macroeconomics Midterm 1 Name Recitation 3 pts Exam Version 15 S M1 Time Limit 60 minutes Guidelines READ THEM Exams written in pencil will not be regraded You must write in ink to be eligible to request a regrade 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 table may be used as a reference Fraction 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 1 10 Decimal 0 50 0 33 0 25 0 20 0 167 0 14 0 125 0 111 0 10 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 9 pages not including this front page numbered 1 9 Good luck Exam Record Part1 30 points Part2 20 points Incorrect Section 3 points Total 50 points Principles of Macroeconomics Spring 2015 Midterm 1 Name Part I 30 points Answer all questions in this part 1pt 1 What is the economic term to describe a person who does not participate in the market interaction for a good but benefits from consuming it a b c d 1pt Parasite Selfish Homo Economicus Free rider 2 Which of the following leads to a higher equilibrium interest rate a b c d Investors become less optimistic People become more thrifty Government borrows by issuing bonds People become more patient 1pt 3 GDP is a The number of goods and services made by a nation s citizens b Always the same as GNP c The estimated value of all goods made in a country d The market value of all final goods and services produced in a country in a year 1pt 4 If quantities of every item produced by a country are equal in 2015 and 2016 but prices are double in 2016 compared to 2015 then the GDP deflator a b c d 1pt 5 In the Solow growth model suppose Y K and that the depreciation rate is 5 percent What percentage of output does investment account for if the steady state level of output is 10 a b c d 1pt Doubled Halved Stayed the same Decreased 5 10 25 50 6 Which of the following increases the total production level of an economy a b c d Higher Higher Higher Higher depreciation rate human capital level inflation rate unemployment rate E1 1102 Spring2015 Midterm 1 1pt In the long run all poor countries will catch up with the rich ones and inequality in the world will decrease Poor countries grow faster than rich countries because they are further from the steady state Among countries with similar steady state level of output poorer countries grow faster than richer ones Given that the capital stock is big in rich countries total depreciation is also big so these countries GDP decrease over time and become poor 8 Which of the following is an approximation of India s GDP a b c d 1pt Name 7 Conditional convergence means that a b c d 1pt Page 2 of 9 7 billion 700 million 7 trillion 70 billion 9 Argentina experienced tremendous growth at the end of the 1800s into the early 1900s What was a driving force behind this a The Panama Canal made South America more attractive to wealthy European countries b Increased agricultural productivity led to growth and attracted foreign investment in Argentina c Full industrialization helped shift agricultural jobs into manufacturing which was profitable because of Argentina s ample energy sources d None of the above 1pt 10 Government spending accounts for roughly what percentage of US GDP a b c d 1pt 11 In 2013 Carland sold 5 cars at 5000 each In 2012 it sold 10 cars at 2500 each Using 2013 as the base year what were the nominal GDP NGDP and real GDP RGDP of 2012 a b c d 1pt NGDP 25000 RGDP 25000 NGDP 25000 RGDP 50000 NGDP 25000 RGDP 12500 None of the above 12 You currently have 20 in your savings account You earn 5 interest In roughly how many years will you have around 160 a b c d 1pt 20 40 60 80 28 42 56 70 years years years years 13 Suppose the leverage ratio equals 3 and assets are worth 400 000 Suppose E represents equity while D represents debt Then D E a b c d 600 000 200 000 300 000 100 000 200 000 600 000 100 000 300 000 E1 1102 Spring2015 Midterm 1 1pt Name 14 If both the savings and depreciation rates increase then a b c d 1pt Page 3 of 9 Capital and output increase Capital and output decrease Capital increases but output decreases Not enough information 15 Which of the following gives the price of a bond with a face value of 6 that has no coupon payments discounted at an interest rate of r and that has 40 years until payment a 6 1 r 40 b 6 1 r 40 c 1 r 40 6 d 1 r 6 40 1pt 16 Which of the following statements is false a b c d 1pt 17 Which of the following is true about supply and demand of a car a b c d 1pt the price of the car increases then the demand curve for the car shifted left the price of the car increases then the supply curve for the car shifted right oil prices increase then demand curve for the car shifts left the cost of producing the car decreases then supply curve for the car shifts left 1 10 then steady state output is 6 12 18 24 19 The international evidence on the relationship between real GDP per capita and health as measured by the infant survival rate per 1000 live births shows that the correlation between these two variables is a b c d 1pt If If If If 18 Y 2 K 35 a b c d 1pt A higher investment rate leads to a higher steady state level of capital An increase in productivity leads to a higher steady state level of capital A higher depreciation rate leads to lower steady state level of capital Output grows faster the closer we are to the steady state level of capital Strongly positive Strongly negative Inconclusive Depends on the country 20 If Real GDP growth was 6 and Nominal GDP growth was 4 in 2004 in the US then a b c d Total production decreased in the US during 2004 Prices went down during 2004 Prices did not change in 2004 All …