Practice Midterm 1 Econ 1102 Name TA Name Section Number NO programmable calculators NO cell phones NO notes NO collaboration with other students Time limit 50 minutes Each page may have has its own directions Follow the directions carefully Clearly indicate which question you are answering Replacement points are added to score of the page on which they are earned The only exception is the 3RP given for Name Section and TA Name these are added to your total score 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 6 pages including this front page numbered 1 6 1 2 3 4 RP Total QUESTION SET 1 25 points 2RP Must show equations and values used for full credit 1 5 pts What are 5 characteristics of a market system 2 5 pts Why do economists use RGDP per capita to study cross country welfare even though there is reason to believe that it doesn t capture the general quality of life very well 3 3pts What are the 3 assumptions economists make about firms 4 3 pts What are the 3 assumptions economists make about consumers 5 4 pt What are the four components of aggregate demand 6 5 pts What distinguishes Modern Economic Growth from historical growth patterns According to in class discussion what part of the following sentence is incorrect and why Modern Economic Growth has made rich countries richer and poor countries poorer 7 2 RP What is the largest componest of USA GDP C I G or NX 1102 Practice Midterm Page 2 of 6 QUESTION SET 2 25 points 1RP Must show equations and values used for full credit 8 4 pts Using the data provided on page 6 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 9 2 pts Suppose Econland is involved in a war that destroys most of its bread and gas factories Show how your Econland PPF diagram would change 10 3 pts Draw an AD AS diagram that shows an economy in AD AS equilibrium For the following four questions show how the AD SR AS or the LR AS line would shift your diagram above Assume you start at equilibrium unless stated otherwise Briefly explain your answer 11 3 pt The government decides to build more roads and highways 12 3 pt There is a sudden increase in oil prices A poor but well run country wants to increase their economic growth and hires you to be their economic advisor 13 2 pt You decide to increase growth by improving one of the country s production factors Clearly state the production factor you will increase and the goal of the growth policy you use to achieve it 14 2pt Give an example of a growth policy that could achieve the goal you stated above 15 6 pt Show an economic analysis of your policy and why it could work Clearly state any potential problems your policy could create NOTE You will earn zero points if you give the same answer as the practice exam 16 1 RP The most recent recession has occasionally been dubbed a man cession as men have been more likely to lose their jobs Is the observation that men are more likely to lose their jobs than women during a recession a feature unique to this recession 1102 Practice Midterm Page 3 of 6 QUESTION SET 3 25 points 1RP Must show equations and values used for full credit 17 10 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 18 10 pts Suppose the following four actions occur in the USA How much would these combined actions add to US GDP in 2010 Give a brief explanation justifying your answer a A Japanese carpenter living and working in the USA purchases 3 000 worth of materials used directly in the production of a garage which is then sold to Smith a Canadian living in the USA for 17 000 b Isabella goes to land she owns cuts down a tree and uses the wood to build a garage for personal use that is worth 15 000 c You purchase a used computer from a friend for 400 d Joe spends 4500 to purchase land 1000 on a stereo and 20 on a haircut e Ford builds 10 cars valued at 20 000 in a factory in China 19 5 pts The following transactions are recorded were recorded in Econ in 1102 What is GDP a Consumers spend 600 buying plastic bags and bread and 40 on imported peanut butter b The Government spends 50 buying bread and 150 buying imported peanut butter c The bread company buys 100 worth of new machines from a domestic machine company and 50 of flour from a flour company d The wheat company exports 20 of wheat 1102 Practice Midterm Page 4 of 6 QUESTION SET 4 25 points Must show equations and values used for full credit 20 4 pts What is the Econland s Nominal GDP in 2000 21 4 pts What is the Econland s Real GDP in 2000 22 3 pts In 2001 Econland has a Real GDP of 5000 thousand What is the growth rate of RGDP 23 4 pts Suppose that Econland continues to grow at the rate you calculated above What is RGDP in 2050 24 3 pts What is the official size of Econland s population 25 2 pts What is Econlands RGDP per capita in 2000 26 2 pts What is the participation rate in Econland 27 3 pts Each Econland worker works 8000 hours per year What is the labor productivity in 2000 1102 Practice Midterm Page 5 of 6 Econland s Economic Data Econland in 2008 RGDP 4000 Natural Rate of Output 4500 Government Purchases 200 MPC 0 8 Tax Revenue 200 You have the following observations about production in Econland in 1982 Goods Bread Gas thousands Plan A 3500 0 Plan B 3000 200 Plan C 2200 260 Plan D 1200 300 Plan E 0 320 Econland produces Bread and Gas purchased by consumers in Econland Base Year 1982 Year Loaves of Bread Nominal Price Units of Gas Produced of Bread Produced 1982 1200 thousand 3 25 300 thousand 2000 1400 thousand 3 50 250 thousand 2001 1550 thousand 3 55 450 thousand Econland collects this data about its population in 2000 Not Employed Students Employed Seeking Job 5 1102 Practice Midterm 19 5 Nominal Price of Gas 1 00 1 20 1 29 Retirees Not Employed Not Seeking Job Striking 9 11 1 Page 6 of 6
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