Fall2022_EXAM2A

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University of Florida *

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2013

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Economics

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Feb 20, 2024

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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. 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. 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.

2 1. Intermediate Goods are not directly included in GDP calculations, because ____. A. including them would lead to double counting B. they may be imported by a foreign manufacturer. C. including them would complicate apples-to-apples comparisons D. physical capital can be used to produce imports 2. Which of the four components of aggregate expenditure accounts for the largest share of GDP in the United States? A. Consumer Spending B. Private Investment Spending C. Government Purchases of Goods and Services D. Net Exports 3. The Population of Netherlands is 18 million people. The Working Age-Population is 11 million. If 7.5 million people are employed and 0.5 million people are unemployed, the employment-to-population ratio is ____. A. 33.33% B. 41.67% C. 54.54% D. 68.18% E. 72.72% For Question #4, refer to the graph below. 4. Refer to the figure above. The value of Autonomous Spending is ____, and the value of Equilibrium Real GDP is ____. A. $200 billion; $200 billion B. $200 billion; $400 billion C. $400 billion; $200 billion D. $400 billion; $400 billion E. None of these answers is correct. Aggregate Expenditure (in billions) Real GDP (in billions) $300 $100 $400 $500 $200 $600 $700 $100 $200 $300 $400 $500 $600 $700 AE

3 5. When calculating GDP, which of the following is considered investment? A. a person depositing $100 per week into her savings account B. a person adding money to his retirement fund C. the purchase of a new assembly line by Ford D. a student increasing his human capital by attending college For Question #6, refer to the graph below. 6. Refer to the figure above, at which point along the business cycle is the economy experiencing a recessionary gap? A. Point H B. Point K C. Point F D. Point I 7. When calculating GDP according to the expenditure approach, government purchases of goods and services would not include ____. A. expenditures on national defense B. construction of a new FBI headquarters in Washington, D.C. C. construction of new interstate highways D. Social Security payments 8. When measuring the value of production in the economy, GDP includes all goods that are produced ____, and GNP includes all goods that are produced ____. A. by firms from that country; by firms from that country B. within that country; by firms from that country C. by firms from that country; within that country D. within that country; within that country

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4 9. Suppose that Real GDP grew by 3.4% in 2021, and that the population grew by 1.7% in 2021. This means that the Real GDP per person growth rate was approximately ____. It will take approximately ____ for Real GDP per person to double. A. 5.1%; 13.73 years B. 1.7%; 41.18 years C. 1.7%; 20.59 years D. 5.1%; 20.59 years 10. When calculating Real GDP using the income approach, taxes (less subsidies) enter _____, in order to _____. A. positively; adjust net domestic income at factor prices to net domestic income at market prices. B. negatively; adjust net domestic income at factor prices to net domestic income at market prices. C. positively; adjust net domestic income at market prices to net domestic income at factor prices. D. negatively; adjust net domestic income at market prices to net domestic income at factor prices. 11. Underground economic activity ____ included in traditional GDP calculations and thus leads these calculations to ____ the true level of production in the economy. A. is; overstate B. is; understate C. is not; understate D. is not; overstate 12. Suppose that there are no taxes or imports, and that the marginal propensity to save equals 0.2. A $40 billion reduction in autonomous spending will lead equilibrium Real GDP and Aggregate Expenditure to ____. A. increase by $200 billion B. increase by $50 billion C. decrease by $50 billion D. decrease by $200 billion E. None of these answers is correct. 13. Suppose that the U.S. economy is NOT initially in Long Run Macroeconomic Equilibrium, and that Real GDP is above Potential GDP. In the long run, wages and the prices of other inputs will ____, and the ____ curve will shift to the ____. A. rise; Short Run Aggregate Supply; left B. fall; Short Run Aggregate Supply; right C. fall; Aggregate Demand; right D. rise; Aggregate Demand; left

5 14. In the presence of inflation, Nominal GDP grows more ____ than Real GDP, because Nominal GDP ____ the effect of rising prices. A. quickly; does not include B. slowly; does not include C. slowly; includes D. quickly; includes 15. When calculating Real GDP using the income approach, depreciation enters positively, because… A. depreciation adjusts for differences between nominal GDP and real GDP. B. depreciation captures the growth in the capital stock between years. C. some production occurs for the replacement of depreciating capital. D. changes in the capital stock are dependent upon inflation. For Question #16, refer to the table below. Category Value Exports $6.2 trillion Gross Private Investment $4.7 trillion Imports $4.1 trillion Compensation to Workers $7.4 trillion Government Purchases $5.3 trillion Proprietors’ Income $2.8 trillion Consumer Spending $8.9 trillion 16. Refer to the table above. The value of aggregate expenditure is ____. A. $21.0 trillion B. $24.7 trillion C. $26.0 trillion D. $29.2 trillion E. $31.2 trillion 17. The Population of the United States is 330 million people. The Working Age- Population is 220 million. If 185 million people are employed and 15 million people are unemployed, the unemployment rate is ____. A. 5.2% B. 6.8% C. 7.5% D. 10.3% E. 12.5%

6 18. The calculation of GDP excludes the value of ____. A. a family member painting the family home B. expenditure on durable goods C. government expenditure on office supplies D. households’ purchases of shampoo E. businesses’ purchases of new machinery 19. Roger recently lost his job as a farmer when technological innovation resulted in his job function being automated. Roger’s situation is an example of ____. A. cyclical unemployment B. frictional unemployment C. seasonal unemployment D. structural unemployment For Question #20, refer to the table below. Year Price of a Beach Ball Price of Sunscreen 2020 $3.50 $10.00 2021 $3.75 $10.00 2022 $3.90 $10.25 20. Refer to the table above. Suppose that the CPI Basket consists of 12 beach balls and 20 tubes of sunscreen. The base year is 2020. In 2021, the value of the CPI is ____. A. 101.24 B. 102.39 C. 103.47 D. 104.05 E. 105.35 21. Consider the market for loanable funds. Suppose that the government increases business taxes. As a result, the equilibrium quantity of loanable funds will ____, and the equilibrium real interest rate will ____. A. increase; rise B. increase; fall C. decrease; fall D. decrease; rise 22. The amount by which the stock of physical capital grows each year is referred to as ____. In the presence of depreciation, it will be ____. A. net investment; greater than the value of gross investment B. net investment; less than the value of gross investment C. gross investment; greater than the value of net investment D. gross investment; less than the value of net investment

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7 23. Unemployment raises several concerns among economists. As we discussed in class, the most concerning of these is ____. A. lost production of goods and services B. lost human capital C. lost income for households D. deterioration of physical capital 24. In March 2007, the unemployment rate was 4.4%. In August 2008, the unemployment rate was 6.1%. If the number of unemployed individuals did not change between March 2007 and August 2008, the labor force ____. A. increased B. either increased or decreased, but we cannot predict for sure C. decreased D. did not change 25. Which of the following statements describes a discouraged worker? A. Dan is available to work but has not looked for a job in the past eight weeks because of repeated applications but not a single job offer B. Rachel does not find her current job profile interesting and is looking for alternative opportunities C. Nick is changing his job, because he has had differences with his current co- workers D. Ned is available to work and has been sending job applications whenever he sees a suitable opportunity. 26. The ____, the greater is the amount that a household decides to save. A. smaller a household's expected future income and the greater a household's wealth B. greater a household's disposable income and the smaller a household's expected future income C. smaller the default risk and the greater a household's wealth D. higher the expected profit and the greater a household's disposable income 27. The Consumer Price Index suffers from a number of biases. Which of the following is NOT one of those CPI biases? A. The new goods bias B. The quality improvement change bias C. The average pricing bias D. The commodity substitution bias

8 For Questions #28 & 29, refer to the table below. Year Price Index Inflation Rate 2020 275.8 3.2% 2021 291.7 5.8% 2022 302.1 X 28. Refer to the table above. The 2022 inflation rate (X) is ____. A. 2.1% B. 3.2% C. 3.6% D. 4.2% E. 5.9% 29. Refer to the table above. Relative to the previous year, in 2021, the price level is ____, and the inflation rate is ____. A. rising; increasing B. falling; decreasing C. falling; increasing D. rising; decreasing 30. Consider the market for labor. An increase in worker productivity leads to a(n) ____, and the equilibrium quantity of employment ____. A. increase in the demand for labor; increases B. reduction in the demand for labor; increases C. reduction in the supply of labor; decreases D. reduction in the demand for labor; decreases E. increase in the supply of labor; increases 31. Two broad sources of Potential GDP growth are growth of ____ and growth of ____. A. exports; imports B. corporations; private firms C. government; the private sector D. the labor supply; labor productivity 32. Consider the market for loanable funds. An increase in the value of household wealth leads to a(n) ____ In response, the equilibrium real interest rate will ____. A. increase in the demand for loanable funds; rise B. reduction in the demand for loanable funds; rise C. reduction in the supply of loanable funds; rise D. reduction in the demand for loanable funds; fall E. increase in the supply of loanable funds; fall

9 For Questions #33 & 34, refer to the graph below. 33. Refer to the table above, when the quantity of employment is 250 million hours worked, the per-hour productivity of labor is ____. A. $60.00 B. $65.00 C. $87.50 D. $162.50 E. $240.00 34. True or False: Refer to the table above. An increase in the number of hours worked leads to a reduction in the per-hour productivity of labor. A. True B. False 35. An individual who does not have paid work is classified as unemployed if any of the following conditions is met EXCEPT ____. A. they are underemployed B. they have applied for a job in the past four weeks C. they are waiting to start a new job in the next thirty days D. they are waiting to hear back from an employer that recently laid them off 36. Consider the Aggregate Expenditure Model. If the value of Real GDP is currently less than the equilibrium value of Real GDP, inventories are ____, and firms will respond by ____. A. shrinking; reducing production and employment B. shrinking; increasing production and employment C. growing; reducing production and employment D. growing; increasing production and employment Real GDP (in billions) Hours Worked (in millions) 400 200 500 600 300 700 800 $50 $55 $60 $65 $70 $75 $80 Production Function

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10 37. Consider the Aggregate Expenditure Model. An increase in the price level leads the AE Line to shift ____, and the equilibrium level of Real GDP ____. A. upward; increases B. upward; decreases C. downward; increases D. downward; decreases 38. Suppose that the U.S. economy is initially in Long Run Macroeconomic Equilibrium. An increase in the income tax rate will lead the U.S. ____ curve to shift and create a(n) ____ in the short run. A. Short Run Aggregate Supply; recessionary gap B. Short Run Aggregate Supply; expansionary gap C. Aggregate Demand; recessionary gap D. Aggregate Demand; expansionary gap 39. Purchases of used goods produced during the previous year _____ included in GDP calculations, because… A. are; that would lead to double counting within the current year’s GDP figures. B. are not; that would lead to double counting within the current year’s GDP figures. C. are; the goods in question were not produced in the current year. D. are not; the goods in question were not produced in the current year. 40. True or False: Professor Knight caught himself singing along to Taylor Swift’s new song Anti-Hero in the line for Krishna Lunch earlier this week. All answers to this question will be accepted. A. True B. False

Fall2022_EXAM2A

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