Econ 1102 Practice Final Name 2 RP 2 RP for writing name as it appears on the class roster Section 2 RP 2 RP for section enrolled in TA Name 2RP 2 RP for correct TA name Non programmable calculators only No cell phones no notes Time limit 120 minutes Each page may have has its own directions Follow the directions carefully Clearly indicate which question you are answering Correctly answering extra questions on a page will generate Replacement Points for that page only For full credit graphs must be completely LABELED and math work shown Be sure to justify your answers clearly and precisely for full credit Rambling incoherent or illegible responses shall be penalized even if correct Points are rewarded for answers consistent with those your instructor would give to the same question This exam is 9 pages including this front page numbered 1 9 GOOD LUCK RP 1 2 3 4 5 6 7 8 Total QUESTIONS 1 25 pts 8RP 8 pts Draw and label a flow diagram with three agents consumers profit earning firms rest of world and three places of exchange factor market output market financial market On your diagram clearly mark each component we use to calculate GDP 12 pts Give one example of an economic policy that Econland could implement to encourage growth Using supply demand graph analysis what are the potential negative effects of the economic policy you recommended Clearly discuss surplus quantity and price effects Be sure to mention If there is an additional effect on the general economy i e government budget problems unemployment 5 pts Draw the Econland PPF in 1982 placing bread on the x axis Indicate a point where this economy might be if it is producing efficiently Inefficiently Show how the PPF moves if the economy experiences war 2 RP Define an Economic System 4 RP List 4 characteristics of the market system 2 RP Define Economic Growth 1 2 3 4 5 6 Save 1 Consumption Expenditure Wages Rent Consumers Economic Output Market Investment Factor Market Profits Revenue Firms Costs Financial Market Repay GROUP B Exports Imports Repay Rest of World Loan 2 A rebate on food to increase health and nutrition of workers would increase demand for food Quantity of food purchased in equilibrium would increase price of food would increase as well Total Consumer and Producer Surplus would increase Unless the government increases taxes somewhere else it will have a budget deficit spend more than it earns in taxes If the government increases taxes on a different good it would generate a dead weight loss for that good 3 Efficient 150 War Inefficient 0 9000 Page 2 of 11 4 A set of institutional arrangements to determine how to distribute scarce resources to satisfy peoples wants 5 Any four of the following a Extensive Private Property Rights b Freedom of Enterprise and Choice c Self Interest as the primary motivating force d Competition e Existence of market and prices f Active but limited government 6 An increase in RGDP per capita Page 3 of 11 QUESTIONS 2 25 pts 25 RP 7 8 9 10 11 12 13 2 pts What is the official size of Econland s population 2 pts What is the size of the Econland s labor force 2 pts How many people are unemployed in Econland 2 pts What is the participation rate in Econland 5 pts What is the Econland s Nominal GDP in 2000 3 pts What is the Econland s Real GDP in 2000 2 pts Suppose RGDP is 20 000 in 2005 and population is the same as it was 2000 Has Econland experienced growth or a recession 14 2 pts What is the GDP Deflator in 2000 15 5 pts What is CPI inflation from 1982 to 2000 16 2 RP Define Gross Domestic Product GDP 17 5 RP State 1 reason why economists use real GDP per capita to study growth instead of Nominal GDP per capita Why don t economists use Real GDP to study growth 18 5 RP Suppose that USA unemployment rate falls from 9 7 to 9 3 State and explain one reason why this number alone NOT a clear sign that more people are finding jobs Name at least one other economic indicator we should know before we can reach the conclusion that more people are finding jobs and briefly explain why this additional information helps 19 3 RP What is the Natural Rate Hypothesis 20 In April 2010 the European Union declared that travelling for tourism is a basic human right and plan to have taxpayers pay up to 30 of travelling costs for youth and the elderly tourists in the EU a 5 RP Why may you expect GDP for individual countries in the EU to decrease under this plan b 5 RP Why may GDP for at least one country in the EU increase you don t need to name a country just explain why GDP may increase 7 15 50 10 5 20 100 8 50 10 60 9 10 10 60 100 0 6 60 Answer Q12 Answer Q11 11 Bread in 2000 6000 thousand Flour purchased by consumers 200 6000 100 200 60 140 6000 3 50 140 15 21000 2100 23 100 thousand or 23 100 000 12 RGDP 00 6000 2 00 140 10 12000 1400 13 400 thousand 13 Growth 14 Nominal Real 23 100 13 400 x100 172 15 CPI 2000 2 3 5 2 2 1 75 CPI Inflation 1 75 1 1 100 75 16 The market value of final goods and services produced within the borders of a given country within a given period of time 0 5 for each highlighted 17 Nominal GDP can be misleading because it doesn t adjust for different prices over time Use Real per capita so that we can see how much output each person receives for welfare to improve need each person to be receiving more 18 Example Maybe some of the unemployed become discouraged workers instead of finding jobs Therefore the decrease unemployment is because people have given up looking not because they have found a job Examples of additional info only need 1 a Participation Rate can see if people are leaving the labor force as discouraged workers b Employment number can see if there are literally more people working c Labor Force can see how many are employed and unemployed with the unemployed rate d Unemployed number can see if the labor force is increasing or not e Number of discouraged workers 19 The claim that unemployment eventually returns to its normal or natural rate regardless of the rate of inflation 20 a To fund the plan the government needs to increase expenditures G BUT this G will probably not stay within the country as people are using it to travel to different countries So either the government increases taxes and decreases C or it runs a deficit and decreases I through crowding out without a matching increase in G b The countries to which people are travelling to will experience an increase in C from tourism which will be reflected as an increase …
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