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1 Name (Please print) ________________________________________ Assigned Seat________ ECO202: PRINCIPLES OF MACROECONOMICS FIRST MIDTERM EXAM SPRING 2010 Prof. Bill Even FORM 4 Directions 1. Fill in your scantron with your unique id and form number. Doing this properly is worth the equivalent of one question. 2. There are 52 multiple choice questions. 3. Your grade is determined entirely upon the answers listed on your scantron. You will not receive your scantron back. Be sure to record your answers on your exam so that you will be able to check your answers once the key is posted. 5. You may use a calculator. Cell phones or other devices that may be used to store text are not allowed. 6. You have until the end of the period to finish the exam. Additional time may be purchased at a price of 5 percentage points per minute. 7. Academic dishonesty is a serious offense. In the event I find someone behaving in a dishonest manner, I will ask that the maximum penalty allowed by the university be imposed.2 1) During 2009, many companies reduced their inventories of manufactured goods. This will mean that A) sales of final goods and services in 2009 will exceed production of final goods and services in 2009. B) production of final goods and services in 2009 will exceed sales of final goods and services in 2009. C) GDP for 2009 will be overstated. D) GDP for 2009 will be understated. 2) In the computation of GDP, social security payments count as A) transfer payments and are included in GDP. B) government expenditure on goods and services and are not included in GDP. C) transfer payments and are not included in GDP. D) government expenditure on goods and services and are included in GDP. 3) Which of the following expressions equals GDP? A) compensation of employees + net exports + depreciation + corporate profits B) compensation of employees + gross investment + rental income + depreciation + corporate profits + indirect taxes - subsidies C) compensation of employees + net interest + rental income + depreciation + corporate profits + proprietors' income + indirect taxes - subsidies D) compensation of employees + consumption + depreciation + net investment 4) In years with inflation, nominal GDP increases ________ real GDP. A) faster than B) at the same rate as C) slower than D) sometimes faster, sometimes slower, and sometimes at the same rate as 5) Gross domestic product is the total ________ produced within a country in a given time period. A) market value of all goods and services B) market value of all final and intermediate goods and services C) amount of final and intermediate goods and services D) market value of all final goods and services 6) If Nike, an American corporation, produces sneakers in Thailand this would A) count for both Thailand's GDP and U.S. GDP. B) count as part of U.S. GDP since it is a U.S. corporation. C) add to neither U.S. GDP nor Thailand's GDP. D) add to Thailand's GDP but not to U.S. GDP. 7) A ton of coal purchased by your local utility to burn to make electricity would be best described as A) a financial asset. B) a final product. C) an intermediate good. D) a used good.3 8) GDP counts only final goods and services because this A) method avoids including any goods that are produced this year and sold next year. B) amount can be more easily determined in the marketplace. C) method avoids double counting of goods going through several stages of production. D) method avoids understating the value of GDP produced during a given year. 9) If we compare the four sources of spending in the economy we see that A) household consumption is the largest. B) government expenditure is the largest. C) household consumption is the smallest. D) business investment is the largest. 10) GDP using the expenditure approach equals the sum of personal consumption expenditures plus A) gross private investment. B) gross private investment plus government expenditure on goods and services plus net exports of goods and services. C) gross private investment plus government expenditure on goods and services minus imports of goods and services. D) gross private investment plus government expenditure on goods and services. 11) Gross private domestic investment is all purchases of newly produced business capital goods and buildings A) plus purchases of capital goods produced in previous years to replace any depreciated capital goods. B) minus the change in business inventories. C) plus the change in business inventories plus residential construction. D) plus fixed investment minus inventory investment. 12) The four parts of the business cycle occur in the following order: A) expansion, trough, recession, peak. B) recession, trough, expansion, peak. C) recession, trough, peak, expansion. D) expansion, trough, peak, recession. 13) Which of the following is the best definition of potential gross domestic product? A) the value of total production B) the value of total production when the economy's resources are fully employed C) the value of total production that grows at 2 percent per year D) None of the above is correct. 14) Real GDP can be criticized as a measure of economic welfare because it A) does not take account of the degradation of environmental quality. B) does not include the value of products produced in the household. C) does not include leisure time available to a society. D) All of the above answers are correct.4 15) Which of the following statements about the comparison between GDP in China and in the United States is correct? A) Using the exchange rate to value China's GDP in dollars shows that China's GDP per person exceeds the GDP per person in the United States. B) China's GDP per person is higher using purchasing power parity prices rather than the exchange rate when valuing China's GDP in dollars. C) Using purchasing power parity prices to value China's GDP in dollars shows that China's GDP per person exceeds the GDP per person in the United States. D) None of the above answers are correct because they are all false statements. 16) Which of the following would lead GDP to ov e rstate economic welfare? A) restaurant workers that under-report tip income B) the existence of home-cooked meals C) a


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MIAMI ECO 202 - Exam

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