Economics 202 Principles of Macroeconomics

Instructions:

Please clear your desk of everything except for a pen or pencil and non-programmable calculator.

Please write your name and Student ID number on the front cover of this examination, and write your answers in the spaces provided. If you need extra paper, please ask me for blank paper that may be attached to this examination at its completion. DO NOT use your own paper.

TURN IN THIS COPY OF YOUR EXAM.

This exam consists of 60 Multiple Choice questions. Choose a SINGLE answer to each question. Correct answers are worth 2 points each, whereas incorrect or blank answers are worth zero points.

The maximum possible score on the whole exam is 120 points.

NAME:

Discussion Section Date/Time:

Multiple Choice questions.

Circle the letter corresponding to the correct answer for each of the following multiple choice ques- tions. Also, mark the corresponding bubble on your scantron.

1. Which of the following is true about US currency:

A. US currency is backed by gold

B. The US uses a hard-pegged exchange rate

C. The US uses a floating exchange rate

D. The US uses a soft-pegged exchange rate

2. Which of the following statements is CORRECT?

A. The labor force is equal to the number of people employed plus the number of people unemployed

B. The working age population includes everyone over the age of 16

C. The unemployment rate is the number of persons who are unemployed divided by the working-age population then times 100

D. The labor-force participation rate is the labor force times 100

3. Suppose the population of Tiny Town is 100 people and the labor force is 70. If 10 of these people are unemployed, the unemployment rate in Tiny Town is

A. 10%

B. 14.3%

C. 12.5%

D. There is not enough information provided to calculate the unemployment rate

4. Suppose real GDP for a country is $13 trillion in 2015, $14 trillion in 2016, $18 trillion in 2017, and $25 trillion in 2018. Over this time period, the real GDP growth rate is

A. increasing

B. decreasing

C. constant

D. negative

5. Suppose the growth rate of GDP in Nigeria is constant at 0.8% the GDP of this country will double in:

A. 98 years

B. 65 years

C. 88 years

D. 8750 years

6. The key financial institutions in the United States include all of the following EXCEPT

A. The US treasury

B. The Federal Reserve

C. commercial banks, pension funds, and insurance companies

D. government-sponsored mortgage lenders

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7. U.S. investment is financed from

A. private saving, government budget surpluses, and borrowing from the rest of the world.

B. private saving, government budget deficits, and borrowing from the rest of the world.

C. private borrowing, government budget deficits, and lending to the rest of the world.

D. private saving and borrowing from the rest of the world only.

8. For a commercial bank, the term “reserves” refers to

A. a banker’s concern (“reservation”) in making loans to an individual without a job.

B. the profit that the bank retains at the end of the year.

C. the cash in its vaults and its deposits at the Federal Reserve.

D. the net interest that it earns on loans.

9. Which of the following expenditures associated with the production of a new high-performance SUV will be directly included in GDP?

A. the sale of bonds to finance the construction of the assembly plant

B. the purchase of used welding robots to assemble to vehicles

C. the purchase of new tires to be installed on the new vehicles

D. the purchase of new machine tools to manufacture the engines

10. Which of the following is an intermediate good?

A. the memory chips in your new smart phone

B. a share of IBM stock

C. flour purchased at the store to bake cookies

D. flowers purchased at the store

11. Which of the following individuals is the best example of a structurally unemployed worker?

A. a recent college graduate who has entered the labor force

B. an individual who has been laid off from his job because of a business cycle recession

C. an automobile worker who has lost her job because of an increase in automobile imports and does not have the skills currently needed by businesses

D. an individual who quits one job in the hope of finding a better job

12. If a bank’s net worth is positive, then the bank definitely is

A. liquid.

B. insolvent.

C. illiquid.

D. solvent.

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13. The quantity of real GDP supplied depends on the

A. level of aggregate demand.

B. quantity of capital, bonds, and stocks.

C. quantity of labor, the quantity of capital, and the state of technology.

D. price level, the unemployment rate, and the quantity of government expenditures on goods and services

14. When talking about aggregate supply, it is necessary to

A. focus on the short run.

B. focus on the long run.

C. distinguish between long-run aggregate supply and short-run aggregate supply.

D. distinguish between long-run full employment and short-run full employment.

15. Aggregate demand is the relationship between the quantity of real GDP demanded and the

A. price level.

B. money wage rate.

C. real wage rate.

D. nominal GDP demanded.