1 Name: ________________________ Class: ___________________ Date: __________ ID: A Econ 2 Summer 2016 Midterm Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Alexis and Tara both mine salt. Alexis mines 300 pounds in 20 hours. Tara mines 400 pounds in 40 hours. Which of the following is correct? a. Alexis’s productivity is greater than Tara’s. This difference could be explained by Alexis having more physical capital than Tara. b. Alexis’s productivity is greater than Tara’s. This difference cannot be explained by a difference in the physical capital each has. c. Tara’s productivity is greater than Alexis’s. This difference could be explained by Tara having more physical capital than Alexis. d. Tara’s productivity is greater than Alexis’s. This difference cannot be explained by a difference in the physical capital each has. Table 2 The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year. Year Consumer Price Index Inflation Rate 2005 100 2006 115 B 2007 125 C 2008 140 D 2009 A 10% 2010 160 E 2. Refer to Table 2. What belongs in space C? a. 120 b. 25% c. 8.7% d. 12% 3. Refer to Table 2. What belongs in space D? a. 12% b. 154 c. 40% d. 15% 4. Refer to Table 2. What belongs in space A? a. 142 b. 150 c. 144 d. 154 5. Refer to Table 2. What belongs in space E? a. 60% b. 6% c. 3.9% d. 6.7% 6. Over time, people have come to rely more on market-produced goods and services and less on goods and services they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has a. caused measured GDP to fall. b. not caused any change in measured GDP. c. caused measured GDP to rise. d. probably changed measured GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has resulted. 7. On January 1, 2016, GDP was $16 trillion. On May 1, 2016 GDP was $16.112 trillion. What was the annualized percentage growth between January and May? (note: you can assume that it is a change over 4 months) a. 1.12% b. 1.5% c. 2.1% d. 3.1% 8. (Old Version): On January 1, 2016, GDP was $16 trillion. On May 1, 2016 GDP was $16.112 trillion. What was the annualized percentage growth between January and May? (note: you can assume that it is a change over 4 months) (Should have been on Test): On January 1, 2016, GDP was $16 trillion. On May 1, 2016 GDP was $16.112 trillion. What was the percentage growth between January and May? a. 1.12% b. 0.9% c. 0.7% d. 0.112% 9. The value of the housing services provided by the economy's owner-occupied houses is a. included in GDP, and the estimated rental values of the houses are used to place a value on these housing services. b. included in GDP, and the actual mortgage payments made on the houses are used to estimate the value of these rental services. c. excluded from GDP since these services are not sold in any market. d. excluded from GDP since the value of these housing services cannot be estimated with any degree of precision. 10. Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year, the price level went up by 15 percent. Which of the following statements is correct? a. Ms. Lane will repay the bank fewer dollars than she initially borrowed.3 b. Ms. Lane's repayment will give the bank less purchasing power than it originally loaned her. c. Ms. Lane's repayment will give the bank greater purchasing power than it originally loaned her. d. Ms. Lane's repayment will give the bank the same purchasing power that it originally loaned her. 11. Phoenix furniture uses 12 workers, each working eight hours, to produce 192 rocking chairs. What is Phoenix’s productivity? a. 192 rocking chairs b. 24 rocking chairs per worker c. 2 rocking chairs per hour d. 2 hours per rocking chair Table 11. Megan’s salary for three consecutive years, along with other values, are presented in the table below. Year 2011 2012 2013 Salary $65,000 $72,000 $76,000 Consumer Price Index 226 230 235 Real Interest Rate 2.5 percent 2.7 percent 1.8 percent 12. Refer to Table 11. Suppose the consumer price index for 2013 is not necessarily 235. Then Megan’s 2013 salary represents more purchasing power than her 2011 salary as long as the consumer price index for 2013 is a. greater than 264.25. b. less than 264.25. c. greater than 258.71. d. less than 258.71. 13. Refer to Table 11. The nominal interest rate for 2012 is a. 0.93 percent. b. 6.70 percent. c. 4.44 percent. d. 4.47 percent. 14. Assuming diminishing returns, a. the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, rich countries should grow faster than poor ones. b. the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, rich countries should grow faster than poor ones. c. the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, poor countries should grow faster than rich ones. d. the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, poor countries should grow faster than rich ones. 15. During a certain year, the nominal interest rate was 8 percent, the real interest rate was 3 percent, and the CPI was 176.7 at the beginning of the year. The CPI at the end of the year was a. 196.1.4 b. 185.5. c. 168.3. d. 159.2. 16. Transfer payments are a. included in GDP because they represent income to individuals. b. included in GDP because they eventually will be spent on consumption. c. not included in GDP because they are not payments for currently produced goods or services. d. not included in GDP because taxes will have to be raised to pay for them. Table 16 The table below contains data for the country of Crete for the year 2010. Total income $5731 Household purchases of durable goods $1108 Household purchases of nondurable goods $702 Household purchases of non-education services $203 Household purchases of education services $302 Household purchases of new housing $816 Purchases of capital equipment $333 Inventory changes $75 Purchases of new structures $267 Depreciation $401 Local government spending on goods and