Econ 375: Intermediate
Macroeconomics
February 26, 2002
Exam 2
Name:
_________________________________
Part One: Circle the best
answer for 2 points.
1.
Which
of the following is used to measure economic growth?
a.
the rate of change in real output (Dy/y)
b.
the rate of change in per capita nominal GDP
c.
the rate of change in the capital stock
d.
none of the above
2.
Which
of the following expressions represents the short-run aggregate production
function?
a.
y = f (K, N) * A
b.
y = f (K, N)
c.
y = f (N)
d.
y = Dy /y
3.
In the short-run, which of the following variables can the firm change?
a.
capital
b.
land
c.
technology
d.
labor
4.
Which of the following expressions represents the marginal product of labor?
a.
y/N
b.
y = f (N)
c. Dy/DN
d.
y = N
5.
A profit maximizing firm will increase employment up to the point where
a.
W = P * MPN
b.
W/P = MPN
c.
W = MPN
d.
both a and b
6.
An increase in real wage will cause an increase in the quantity supplied of
labor when
a.
the substitution effect dominates the income effect
b.
the substitution effect is equal to the income effect
c.
the income effect dominates the substitution effect
d.
none of the above
7.
Which of the following is NOT a function of money
a.
medium of exchange
b.
store of value
c.
unit of account
d.
none of the above
8.
Which of the following expressions represents the equation of exchange?
a.
M * k = P * y
b.
M * V = k * y
c.
M * V = P * y
d.
M * y = P * V
9.
An increase in k will cause
a.
a leftward shift in ys
b.
a righward shift in ys
c.
a righward shift in yd
d.
a leftward shift in yd
10.
Which of the following is NOT explicitly taken into account when calculating
GDP using the income approach?
a.
investment
b.
wages
c.
business profits
d.
salaries
11.
Suppose the GDP deflator in 1998 equals 1.27.
This indicates that:
a.
real GDP in 1998 is 27% higher than in the base year
b.
nominal GDP in 1998 is 27% higher than in the base year
c.
the overall price level in 1998 is 27% higher than in the base year
d.
both b and c
12. Suppose a firm produces goods in a given
year that are not sold in that year.
These unsold goods
a.
are referred to as depreciation
b.
are excluded from GDP
c.
are called intermediate goods
d.
are called inventory investment
13.
Can a country’s GDP exceed its GNP?
Explain in detail.
14.
Is it possible for nominal GDP to increase in a given period and for real GDP
to decrease in the same period? Explain
in detail.
15. Is it possible for the nominal interest rate to fall during a given period and the real interest rate to increase during the same period? Explain in detail.
Part three: Answer the
following two questions for 15 points each.
16.Based on the exchange rate model presented in class, graphically illustrate and explain in detail what effect a reduction in the money supply will have on the domestic economy and the exchange rate.
17. During the first half of 1997, the U.S. congress discussed the possibility of a budget which would cut the size of the budget deficit. Based on your understanding of the loanable funds model, graphically illustrate and explain in detail what effect a reduction in the budget deficit will have on the interest rate, investment, consumption and saving.