ECO 2013 Principles of Macroeconomics Midterm 2 Fall 2023 PDF

NAME: _______________________________________ UFID: ________________________________________ ECO 2013 PRINCIPLES OF MACROECONOMICS MIDTERM 2 Form Code: A READ THE FOLLO...

NAME: _______________________________________ UFID: ________________________________________ ECO 2013 PRINCIPLES OF MACROECONOMICS MIDTERM 2 Form Code: A READ THE FOLLOWING INSTRUCTIONS!! 1) There are 40 questions on this exam. Each question is worth 2.5 points. It is your responsibility to ensure that your exam has all 40 questions. You have 75 minutes (from the time the Proctors announce the start of the exam) to finish. 2) Be sure to complete your Scantron answer sheet properly. This includes filling in all the bubbles for your name and UFID and signing the Scantron. Grades that must be entered manually due to an incorrectly completed answer sheet will be penalized 5 percentage points. You may fill in your name and UFID while waiting to start the exam. 3) Answers marked on the Scantron answer sheet are final. If you forget to bubble in an answer or mistakenly bubble in the wrong one, that is your responsibility. 4) You may use a hand-written 3x5 inches notecard. It may be printed on both sides, but cannot have any foldout portions. 5) Aside from your notecard, this test is closed book/closed notes. You may use a four-function or scientific calculator during the exam. As specified in the syllabus and in class, all other devices (including PDAs and Smartphones) are strictly forbidden. By signing the scantron form, you agree that you will abide by the University of Florida’s Student Honor Code, that you will not accept or provide help that has not been expressly permitted by Professor Knight or the TA team, and that you understand that failure to comply with these policies will result in disciplinary action. The answer key and your grades will post in Canvas within four days of this exam date. All emails should be directed to the grader. 1. GDP calculations ____ the value of newly produced physical capital and ____ the value of intermediate goods. A. directly include; directly include B. directly include; do not directly include C. do not directly include; directly include D. do not directly include; do not directly include 2. Consider the Market for Loanable Funds. When the government reduces business taxes, the equilibrium real interest rate ____, and the equilibrium quantity of lending and borrowing ____. A. falls; increases B. falls; decreases C. rises; increases D. rises; decreases 3. Which of the following best describes the distinction between GDP and GNP? A. GDP includes the value of gross investment in physical capital, whereas GNP includes the value of net investment in physical capital. B. GDP excludes the value of used goods, whereas GNP includes the value of used goods that have been resold during the current year. C. GDP is calculated using base year prices to remove the effect of inflation, whereas GNP is calculated using current year prices. D. GDP measures the value of actual production in the economy, whereas GNP measures the economy’s productive capacity. E. None of these answers is correct. 4. The calculation of GDP excludes the value of ____. A. households’ purchases of shampoo B. a family member painting the family home C. expenditure on durable goods D. government expenditure on office supplies E. businesses’ purchases of new machinery 5. Kyle lost his job as a cashier at Target, because Target and other retail stores decide to eliminate the cashier position and switch entirely to self-checkout. Kyle is ____. A. naturally unemployed B. structurally unemployed C. cyclically unemployed D. frictionally unemployed 6. TRUE OR FALSE: The New Goods Bias arises, because new products are not included in the CPI basket of goods until after their price has initially fallen. A. True B. False 2 7. Allison recently took out a loan to buy a new car. The nominal interest rate on the loan contract was 6%. Over the life of the loan, Allison expects that the inflation rate will be 2%. Allison’s anticipated real interest rate is ____. A. 2% B. 3% C. 4% D. 6% E. 8% 8. Which of the following is NOT one of the problems associated with inflation? A. Inflation redistributes wealth from lenders to borrowers. B. Inflation reduces production and employment in the economy. C. Inflation redistributes income from workers to employers. D. Inflation diverts productive resources. E. Inflation reduces human capital. For Questions 9 & 10, refer to the table below. Labor Market Category 2022 2023 Population 275 million 350 million Employed 140 million 230 million Labor Force 160 million 250 million Not in the Labor Force 65 million 50 million 9. Refer to the table above. The Unemployment Rate in 2022 is ____. A. 6.25% B. 8.00% C. 10.75% D. 11.50% E. 12.50% 10. Refer to the table above. The Employment-to-Population Ratio in 2022 is ____. A. 50.91% B. 62.22% C. 65.71% D. 71.33% E. 76.67% 11. Underemployed workers ____ considered employed. They are one reason that the unemployment rate ____ the problem of joblessness in the economy. A. are; understates B. are; overstates C. are not; overstates D. are not; understates 3 12. Suppose that Real GDP is $23.4 trillion at the end of 2022 and $25.3 trillion at the end of 2023. The population grew 1.2% during 2023. The Real GDP growth rate was ____ during 2023. If Real GDP continued to grow at the same rate, it would double in approximately ____ years. A. 6.9%; 10.14 B. 8.1%; 8.64 C. 9.3%; 7.53 D. 10.5%; 6.67 E. None of these answers is correct. 13. Phillip is a healthy 22-year-old who has no job and is available for work, but has not actively looked for a job in the past month. The Current Population Survey identifies Phillip as ____, ____ the labor force, and ____ the working-age population. A. unemployed; part of; part of B. unemployed; part of; not part of C. not unemployed; part of; part of D. not unemployed; not part of; part of E. not unemployed; not part of; not part of For Question 14, refer to the table below. Price of Wireless Year Price of Tablets Headphones 2021 (base year) $550 per tablet $300 per pair 2022 $560 per tablet $310 per pair 2023 $575 per tablet $325 per pair 14. Suppose that the CPI basket includes 3 tablets and 2 pairs of wireless headphones. The CPI in 2022 is ____, and the inflation rate in 2022 is ____. A. 101.45; 1.08% B. 102.22; 2.22% C. 103.67; 2.85% D. 105.56; 5.56% E. None of these answers is correct. 15. Suppose that the U.S. economy is initially in Long Run Macroeconomic Equilibrium. An increase in the U.S. Dollar exchange rate will lead the U.S. ____ curve to shift and create a(n) ____. A. Short Run Aggregate Supply; recessionary gap B. Short Run Aggregate Supply; inflationary gap C. Aggregate Demand; recessionary gap D. Aggregate Demand; inflationary gap 4 16. An individual who does not have a paid job may be counted as unemployed for all of the following reasons EXCEPT … A. They have applied for a job within the past four weeks. B. They are waiting to hear from an employer who recently laid them off. C. They are waiting to start a new job in 30 days. D. They are working for free in a household job. 17. At the beginning of 2023, Starbucks had 32,540 espresso machines. During the year, they purchased 593 new espresso machines, but 328 espresso machines wore out and become unusable. During 2023, Starbucks’ net investment was ____, and its gross investment was ____. A. 921 espresso machines; 593 espresso machines B. 265 espresso machines; 593 espresso machines C. 921 espresso machines; 265 espresso machines D. 593 espresso machines; 921 espresso machines 18. The CPI in Rushlandia was 204 in 2021, 212 in 2022, and 225 in 2023. According to this data, relative to 2022, the price level ____, and the inflation rate ____ in 2023. A. rose; increased B. rose; decreased C. fell; increased D. fell; decreased 19. Sara earns $4,500 in income each month, but she must pay $1,200 in taxes. She spends $2,400 on housing, $650 on food, and $400 on other expenses each month. Sara’s monthly disposable income is ____, and her monthly saving is ____. A. $900; -$150 B. $900; $250 C. $3,300; $250 D. $3,000; $150 E. None of these answers is correct. 20. Rhonda is a part-time student at UF and does not currently have paid work. If an employer offered her a job, however, she would gladly accept it. Rhona is ____. A. a discouraged worker B. underemployed C. a marginally attached worker D. seasonally unemployed 21. Structural unemployment includes people who become unemployed from ____. A. changes in the business cycle B. technological change C. changes in the seasons D. going back to school E. normal changes in the labor force 5 22. Suppose that the U.S. economy is initially in Long Run Macroeconomic Equilibrium. A reduction in the value of household wealth will lead the U.S. ____ curve to shift ____ and create a(n) ____. A. Short Run Aggregate Supply; leftward; recessionary gap B. Short Run Aggregate Supply; leftward; inflationary gap C. Aggregate Demand; rightward; recessionary gap D. Aggregate Demand; leftward; inflationary gap E. None of these answers is correct. For Question 23, refer to the table below. Category Value Compensation to Workers $67 million Investment $21 million Net Interest Paid to Capital $18 million Corporate Profits $ 30 million Proprietors’ Income $27 million Net Taxes $4 million Rental Income Paid to Land $15 million Depreciation $8 million Imports $12 million 23. Refer to the table above. Based on the information provided above, Gross Domestic Product equals ____, according to the ____ approach. A. $145 million; expenditure B. $149 million; income C. $156 million; expenditure D. $169 million; income E. $172 million; income 24. When calculating Gross Domestic Product using the Income Approach, we must ____ the value of net taxes, because Gross Domestic Product ____. A. add; is calculated at market prices B. subtract; includes gross investment C. subtract; is calculated at market prices D. add; includes gross investment 25. When the real interest rate rises, households will ____ their saving. This leads to a(n) ____ in the quantity of loanable funds supplied. A. reduce; increase B. reduce; decrease C. increase; increase D. increase; decrease 6 26. When calculating GDP according to the Expenditure Approach, which of the following items should appear in the consumer spending category? A. purchasing a new home B. paying a medical bill C. purchasing a historic home D. buying a used textbook on Amazon E. buying 50 shares of Apple stock 27. Consider the Market for Loanable Funds. If households believe that their incomes will fall in the coming months due to a looming recession, the equilibrium real interest rate ____, and the equilibrium quantity of lending and borrowing ____. A. falls; increases B. falls; decreases C. rises; increases D. rises; decreases 28. Suppose that the U.S. economy is experiencing a recessionary gap. In the long run, we should expect that the wages paid to labor will ____, and the Short Run Aggregate Supply Curve will shift ____. A. fall; leftward B. rise; leftward C. fall; rightward D. rise; rightward 29. An increase in the amount of available labor leads to a(n) ____ in Potential GDP and a(n) ____ in per-worker productivity. A. reduction; increase B. reduction; reduction C. increase; reduction D. increase; increase 30. Professor Knight hires a neighbor to cut his lawn. Neither person reports the transaction for tax purposes. This productive activity is excluded from GDP calculations, because it is ____. A. marginally attached production B. household production C. underproduction D. underground economic activity E. part of the black market 31. True or False: Changes in the real interest rate ONLY affect aggregate expenditures through consumer spending and net exports. A. True B. False 7 32. The current value of Real GDP exceeds the equilibrium value of Real GDP. This implies that firms’ inventories are ____, and we should expect Real GDP and employment to ____ in response. A. growing; increase B. shrinking; increase C. growing; decrease D. shrinking; decrease 33. An individual holds $35,000 in a savings account and the price level rises. As a result, ____. A. The individual’s wealth increases, and consumption expenditures rise. B. The individual’s wealth is not affected. C. The individual’s wealth decreases, and consumption expenditures fall. D. There is too little information. 34. Economists suggest that the Short Run Aggregate Supply curve is upward sloping, because some prices are sticky. When inflation occurs, the prices of ____ take some time to adjust, making firms ____ profitable in the short run. A. final goods and services; less B. input goods including labor; more C. final goods and services; more D. input goods including labor; less 35. The macroeconomic production function has a positive slope, because____. A. technological progress increases Potential GDP. B. the number of workers increases when the real wage rate rises. C. firms demand more labor when the productivity of labor increases. D. increasing the number of workers increases Potential GDP. 36. Suppose that there are no taxes or imports. The marginal propensity to consume (mpc) is 0.8, and Real GDP is $150 billion. Business investment increases by $2 billion. The multiplier is ____, and Real GDP will increase by ____. A. 1.25; $1.25 billion B. 1.25; $12.5 billion C. 2.5; $25 billion D. 5; $10 billion E. None of these answers is correct. 8 For Questions 37-39, refer to the table below. Quantity of Quantity of Price of Price of Year Eggs Milk Eggs Milk 2021 (base) 250 dozen 450 gallons $5 per dozen $3 per gallon 2022 275 dozen 475 gallons $5 per dozen $4 per gallon 2023 280 dozen 500 gallons $6 per dozen $5 per gallon 37. Refer to the table above. Suppose that eggs and milk are the only two final goods produced in this economy. The value of Nominal GDP in 2022 is _____. A. $2,800 B. $2,900 C. $3,275 D. $4,100 E. None of these answers is correct. 38. Refer to the table above. Suppose that eggs and milk are the only two final goods produced in this economy. The value of Real GDP in 2022 is _____. A. $2,800 B. $2,900 C. $3,275 D. $4,100 E. None of these answers is correct. 39. Refer to the table above. The Real GDP growth rate is ____ in 2022. If Real GDP continued to grow at the same rate, it would double in approximately ____ years. A. 3.57%; 19.6 B. 5.29%; 13.23 C. 7.69%; 9.1 D. 9.12%; 7.68 E. None of these answers is correct. 40. True or False: Professor Knight had to take on a second job at Opus Coffee after purchasing Bad Bunny concert tickets. All answers to this question will be accepted. A. True B. False EXTRA CREDIT: Similar to the Short Writing Assignments, I want to understand your confidence on this exam and will offer you extra credit if you can accurately predict your performance on this exam. In the Section Number field of your scantron, enter the number of questions (0-40) that you think you correctly answered on this exam. If you are correct, you will receive 5 points of extra credit. If you are within 2 questions, you will receive 3 points of extra credit. 9