Midterm Exam winter 2023-2024

Date: Thursday, 13/11/2023.

INSTRUCTIONS

1. Cell phones, books and notes are strictly not permitted.

2. Only non-scientific (no memory) calculators are permitted.

3. Choose one answer; choosing more than one answer is graded zero.

4. Record your answer on the answer sheet provided in page 6.

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 1
MCQ (100 pts)
7) The law of demand states, with increase in
1) Which of the following is a macroeconomic price there is:
problem? A. Decrease in quantity demanded
A. what do plumbers earn more than janitors B. Increase in quantity demanded
B. the reasons for the increase in average C. Decreased demand
prices D. Increased demand
C. whether the army should buy more tanks or 8) Which of the following is not a cause of the
more missiles shift in demand for a product?
D. the reasons for the increase in the price of A.Change in the price of substitutes
orange juice B. Change in the income of a
2) Changes in exogenous variable ______ consumer C. Change in the price of a
A. has no effect on the graphic product
B. shift curve D. None of the above
C. moves along the curve 9) Increase in demand can occur due to:
D. none of these answers A.Increase in income of the consumer
3) The study of determining the prices in B. Decrease in price of the complementary
individual markets is called ______ good
A. Negative economics C. Increase in price of the substitutes
B. Microeconomics D. All of these
C. Positive economics 10) Movement along the demand curve
D. Macroeconomics illustrates:
4) Macroeconomics is where students learn how A. shift in quantity demanded
to think about the economy as ______ A. One B. complement effect
market of goods and services C. change in quantity demanded
B. Multi -markets that affect each other C. D. income effect
One market including firms and consumers D. 11) Increase in demand is shown by demand
Two markets: labors and goods curve when:
5) Macroeconomic models are used to explain A. The curve shifts right
how ______ variables influence B. The curve shifts left
______variables. C. Movement along the curve there is no
A. Endogenous; exogenous change
B. Exogenous; endogenous D. Movement along the curve
C. Microeconomic; macroeconomic 12) The difference between real GDP and
D. Macroeconomic; microeconomic nominal GDP is that:
6) Variables that a model takes as given are A. Real GDP measures total value of goods and
called: services with adjustment for inflation, and
A. Endogenous nominal GDP is not adjusted for inflation.
B. Exogenous B. Real GDP measures unadjusted values of
C. Market clearing final goods and services whereas nominal
D. Macroeconomic GDP is inflation adjusted.
 C. Real GDP measures unemployment in 14) All of the following would be included in the
current years, whereas nominal GDP expenditure approach to calculate GDP
measures unemployment in past years. except:
D. Nominal GDP measures inflation, whereas A. Consumer spending
real GDP does not measure unemployment. 13) B. Government investments
The relationship between Gross Domestic C. Private investments
Product (GDP) and Gross National Product D. Consumer spending and savings
(GNP) is that: E. Net exports
A. GDP=GNP + Net Exports 15) How is the GDP deflator used?
B. GDP=GNP - Net Exports A. To calculate nominal GDP
C. GDP=GNP + Depreciation B. To deflate the Consumer Price Index
D. GDP=GNP-Depreciation
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C. To calculate real GDP. Not in the labor force 500
D. To calculate inflation.
16) How do you calculate the consumer price
index or CPI?
A. Diving the annual GDP by the price of 19) According to the chart, the unemployment
basket and multiply by 100. rate is:
B. Diving the base year GDP by the price of A. 10.5%
basket of goods & services of the current B. 12.5%
year and multiply by 100. C. 11.1%
C. Diving price of basket in base year by the D. 1.75%
price of basket of goods & services of the 20) According to the chart, the size of the labor
current year and multiply by 100. force is:
D. Diving the price of basket of goods & A. 7500
services of the current year and multiply B. 9000
by the price of basket in base year and C. 9500
multiply by 100. D. 6500
17) Consumer price index (CPI) is: 21) Jessica received her college degree in
A. A measure which provides the most computer science and was offered a job at
complete outlook of the entire economy of IBM. She decides to take a year off and
nation. travel throughout Europe. What would this
B. A measure of the overall cost of the goods decision do to the unemployment rate? A.
and services bought by a typical consumer. C. An increase in the unemployment rate B. A
A measure of the ability of a typical person in decrease in the unemployment rate C. A
a society to obtain goods and services. D. A decrease in the labor force
measure of how much debt a typical person D. No change in the unemployment rate
has in a given society.
According to the table above, answer questions
18) The goods sold to ultimate or final
22 and 23:
purchasers are called:
A. Final goods and services Year Good Quantity Price
B. Primary goods.
C. Intermediate goods. 2022 Dress 200 $30
D. All of them (Base year)
Blouse 10 $10
Refer to the following chart to answer 2023 Dress 100 $40
questions 19 and 20.
Employed 8000 Blouse 30 $10

Unemployed 1000
22)In 2023, real GDP is:
25) Given the following data from a small tiny
A. 3300
nation, compute the real GDP for year 2021
B. 4300
using 2020 as the base year
C. 1800
D. 3700 Year Price of Quantity Price of Quantity
23)In 2023, the GDP deflator is: bread of bread butter of butter
A. 51.5
201 $1 100 $2 50
B. 43.5
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C. 130.3
D. 37.00 202 $1.5 200 $3 150
24) Gross private domestic investment is all 0
purchases of newly produced business
capital goods and buildings________ 202 $2 250 $4 200
A. minus the change in business inventories. B. 1
plus the change in business inventories plus
residential construction.
C. plus fixed investment minus inventory A. $750
investment. B. $850
D. plus purchases of capital goods produced in
C. $675
previous years to replace any depreciated
D. $975
capital goods.
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26) Suppose disposable income increases from B. 0
$7 trillion to $7.5 trillion, consumption C. 1500
expenditure increases from $6.5 trillion to D. None of the above are correct.
$6.9 trillion. Thus, the MPC must equal to: 30) The relationship between consumer
A. 0.70 spending and income is known as the: A.
B. 0.80 Consumption function.
C. 0.40 B. Rate of income.
D. 1.00 C. Inflation rate.
27) Dennis decides to loan his friend some D. rate of individual wealth.
money. He would like to see a 5% return on 31) When there is a decrease in labor supply,
the loan. If the current rate of inflation is real wages are likely to:
15%, what should he charge as an interest A. Remain the same
rate? B. Allow less leisure time
A. 10% C. Decrease
B. 20% D. Increase
C. 25% 32) The knowledge and skills acquired by a
D. 12% worker through education and experience is
28) Which of the following equations represents a description of:
national saving (S) in a closed economy? A. A. Physical capital
Y – I – G – NX B. Human capital
B. Y – C – G C. Labor
C. Y – I - C D. Entrepreneurship
D. G + C – Y 33) A nation's net exports consist of:
29) Suppose that in a closed economy A. Its exports plus its imports.
GDP=10000, Taxes=1500, Consumption B. Its exports minus its imports.
C=6500, and Government expenditures C. Its exports plus all other nation's imports. D. Its
G=2000; then, national saving (S) is equal imports plus all other nation's exports. 34) Suppose
to: the stock of capital remains
A. – 500 constant. By adding more labor, perhaps a
 second work shift, output: B. An additional worker is hired.
A. Decreases C. Workers get paid for working overtime D. Work
B. Increases is outsourced to a foreign country 38) An increase
C. Remains the same in the supply of labor will
D. Becomes more costly ________ real wages and ________
35) A wage rate that is adjusted for changes in employment.
the price level is known as the: A. increase; increase
A. Real wage. B. increase; decrease
B. Nominal wage C. decrease; increase
C. Minimum wage D. decrease; decrease
D. Functional wage 39) Disposable income is equal to:
36)If the real wage rises: A. consumption expenditure minus taxes plus
A. The marginal cost of labor falls transfer payments.
B. The marginal benefit of the worker B. aggregate income minus taxes plus
increases government expenditures on goods and
C. Firms will hire additional labor services.
D. Firms will hire less labor C. aggregate income minus taxes plus transfer
37) The marginal benefit of a worker to a firm payments.
is the value of the extra output that results D. aggregate income plus transfer payments.
when: 40) A consumption function shows a: A. negative
A. Some workers are laid off and the (inverse) relationship between consumption
remaining workers become more expenditure and saving.
productive

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B. positive (direct) relationship between expenditure when disposable income increases.
consumption expenditure and the price level. C. 43) The marginal propensity to consume is
negative (inverse) relationship between equal to:
consumption expenditure and disposable A. what people spend out of total disposable
income. income.
D. positive (direct) relationship between B. the desired amount of consumption
consumption expenditure and disposable expenditure as a proportion of disposable
income. income.
41) The consumption function shows how C. the average, after-tax consumption amount.
much: D. the change in consumption expenditure
A. all households plan to consume at each resulting from a change in disposable income.
level of real disposable income. 44) The aggregate expenditure curve shows: A.
B. all households plan to consume at each how consumption changes in response to a
possible real interest rate. change in disposable income.
C. real disposable income people will earn at B. how planned aggregate expenditure and real
each income tax bracket. GDP are related.
D. all households plan to consume at each C. a negative relationship between the price
level of savings. level and real GDP.
42) The positive slope of the consumption D. Both answers B and C are correct.
function indicates that: 45) The supply of real GDP is a function of: A.
A. consumers spend less out of each extra the total expenditures of consumers, investors
dollar of income. and government.
B. the amount of household wealth is subject B. the sum of wages, salaries, corporate
to change. profits, rents and interest.
C. when prices fall consumers spend more. D. C. only the state of technology.
consumers increase their total consumption D. the quantities of labor, capital and the state
 of technology. C. decreases; increases
46) The demand for loanable funds curve is: A. D. decreases; decreases
downward sloping when plotted against the 49)Intermediate goods are excluded from GDP
real interest rate. because:
B. vertical at the full employment level of A. their inclusion would involve double
investment. counting.
C. constant at the maximum expected profit B. they represent goods that have never been
rate. purchased so they cannot be counted.
D. upward sloping when plotted against the C. their inclusion would understate GDP. D. the
real interest rate. premise of the question is incorrect because
47) The demand for loanable funds curve shows intermediate goods are directly included in
that as the ________ interest rate increases, calculating GDP.
there will be ________ the curve. 50) The circular flow diagram indicates that: A.
A. nominal; a rightward shift in households sell the services of factors of
B. real; a rightward shift in production to firms.
C. nominal; movement down along B. firms buy the services of factors of
D. real; movement up along. production from the government.
48) An increase in the real interest rate C. households sell goods and services to the
________ the quantity of loanable funds government.
supplied and ________ the quantity of D. firms buy goods and services from
loanable funds demanded. households.
A. increases; increases
B. increases; decreases

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