ECON303 Intermediate Macroeconomics Practice Exam 1 Answer Key 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 B D B A B D B D C A B B C D B A D C B B A A D B C C D C A Some possible but not all explanations include a different price levels in the two countries would result in different amounts of real GDP i e different quantities of goods and services available in each country b different sized populations could result in different quantities of goods and services available per person in each country c different levels of nonmarket production in the two countries would alter the quantity of goods and services available in each country d different amounts of leisure time available not captured in nominal GDP figures would cause economic well being to differ in the two countries Page 1 e different distributions of income in the two countries could alter the quantity of goods and services available to the typical citizen in each country f different quantities of both positive and negative externalities associated with producing GDP such as pollution and congestion which are not measured in GDP would cause the different levels of economic well being between the two countries 31 a employed b out of the labor force c employed d out of the labor force e unemployed 32 a 3 900 1 600 4 percent b 1 600 0 1 600 c 3 900 1 100 9 percent d 1 600 500 1 100 33 a b i real interest rate decreases ii national saving increases iii investment increases iv consumption decreases v output is unchanged fixed because it is determined by the factors of production 34 a Output increases by less than 10 percent because of diminishing returns to labor b The real wage decreases because the average productivity of labor decreases Y L decreases as Y increases less in proportion than the increase in L so the MPL which equals 1 Y L decreases c The real rental price of capital increases because the average productivity of capital increases Y K increases as Y increases and K is constant so the MPK Y K increases d Labor s share of income is unchanged since it depends only on the parameter 1 from the production function which does not change 35 a 2 000 b Yes the production function exhibits constant returns to scale Doubling each factor of production to 200 will double output to 4 000 c 10 percent 36 a 1 billion b 10 billion c 1 billion d 1 82 billion Page 2
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