Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

Econ 102 Exam # 1

Summer 2022

Part I (70 points) Multiple Choice

Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs that might be produced in a year with the limited capacity for Country X, ceteris paribus.

Table 1.3
Production Possibilities for Brushes and Combs

Combination	Number of Brushes	Opportunity Cost of Brushes in Terms of Combs	Number of Combs	Opportunity Cost of Combs in Terms of Brushes
J	0	NA	4
K	10		3
L	17		2
M	21		1
N	23		0	NA

 _D__1. (Table 1.3) The lowest opportunity cost for combs in terms of brushes is

A. 10 brushes per comb.

B. 4 brushes per comb.

C. 8.5 brushes per comb.

D. 2 brushes per comb.

_D__2.  Those who work part-time and do not want to work full-time are referred to as

A. Underemployed.

B. Employed.

C. U3 unemployed.

D. Discouraged workers.

_C__3. What is the likely consequence of an unemployment rate falling below the rate at which "full employment" is achieved?

A. An increase in discouraged workers.

B. The threat of recession.

C. Increased inflationary pressures.

D. None of the choices are correct.

_A__4. (Figure 1.7) The cost of producing at point J rather than point D is

A. KM units of clothing.

B. AC units of food.

C. OM units of clothing.

D. OA units of food.

__C_5. Generally speaking, which of the following groups would tend to gain real income from the wealth effects of inflation?

A. people with fixed income

B. people who have savings accounts at fixed rates of interest

C. people who own assets that are appreciating faster than the inflation rate

D. people who hold all of their assets in the form of cash

_B__6. If the Consumer Price Index rose from 140.9 in 2005 to 418.5 in 2015, what is the total percentage change in prices over this 10-year period?

A. 131.34 percent.

B. 197 percent.

C. 80.9 percent.

D. 127.21 percent.

_B__7. Which of the following is not a macroeconomic statement?

A. The unemployment rate for the United States rose to 5 percent in the last quarter.

B. Jenny's wage rate rose and, in response, she decided to work more hours.

C. The Federal Reserve lowered interest rates at its last meeting.

D. Congress increased the minimum wage rate in January.

_B__8. (Figure 1.5) At which of the following points would the opportunity cost of producing more doughnuts be greatest?

A. Point A

B. Point C

C. Point F

D. Point E

_B__9.  Real GDP is more accurate than nominal GDP in making comparisons of output over time because

A. Real GDP is not affected by changes in productivity or the size of the labor force.

B. Nominal GDP may change simply because of price changes over time.

C. Real GDP is not affected by output changes.

D. Nominal GDP is the hypothetical output that would be produced at full employment.

_B__10. Economic growth would best be represented by a

A. shift inward of the production possibilities curve.

B. shift outward of the production possibilities curve.

C. movement from inside the production possibilities curve to a point on the production possibilities curve.

D. movement from the production possibilities curve to a point inside the production possibilities curve.

D___11. Macro equilibrium always occurs when

A. Aggregate supply is greater than aggregate demand.

B. The labor force is fully employed.

C. The level of output is expanding.

D. Aggregate demand equals aggregate supply at a given average price level.

_B__12. A recession would most likely increase

A. structural unemployment

B. cyclical unemployment

C. labor force participation

D.  frictional unemployment

_B__13.  When an individual makes repairs to her own home instead of hiring a company to make the repairs, the activity is

A. Included in GDP because it represents production.

B. Productive but excluded from GDP because it is a nonmarket activity.

C. Excluded from GDP because it is an intermediate good.

D. Included in GDP but not included in GNP.

_B__14. Part-time workers who desire full-time employment are

A. discouraged workers and are included U3 unemployment.

B. underemployed and are included U3 employment.

C. underemployed and are not included U6 unemployment.

D. not part of the labor force and do not contribute to either U3 or U6.

_8.3__15. What was the unemployment rate in 2004 in Table 6.1?

Table 6.1

	2004	2005	2006
Population	300 million	325 million	375 million
Labor Force	120 million	165 million	200 million
Unemployed	10 million	15 million	35 million

A. 4.33 percent.

B. 75 percent.

C. 3.3 percent.

D. 7.7 percent.

_C__16. If nominal GDP was $11,500 billion in 2018 and the price level in 2018 was 111.6 (relative to the base year price level of 100), then real GDP would have been approximately

A. $9,795 billion.

B. $9,750 billion.

C. $10,305 billion.

D. $10,485 billion.

_A__17.  If the CPI doesn't measure product quality improvements, the CPI tends to

A. Understate the inflation rate.

B. Overstate the inflation rate.

C. Understate economic growth.

D. Be artificially low.

_A__18. A furniture factory produces dining room sets. The lumber it purchases from the lumberyard is a(n)

A. intermediate service.

B. final good.

C. intermediate good.

D. final service.

_B__19.  The real interest rate is

A. The difference between the prime rate and the rate charged by the Federal Reserve Bank on loans.

B. The nominal interest rate minus the anticipated rate of inflation.

C.  The inflation rate minus the percentage increase in average wages.

D. The sum of inflation rates and unemployment rates.

_B__20. Full employment includes

A. seasonal and cyclical unemployment only.

B. cyclical and frictional unemployment only.

C. frictional and structural unemployment only.

D. structural and seasonal unemployment only.

Table 6.6

Unemployment Rate

	Year 1
Working-Age Population	120 million
Employed	75 million
Unemployed	12 million
Discouraged Workers	2 million

_B__21. (Table 6.6) If discouraged workers are counted as unemployed, what would be the unemployment rate for this economy in Year 1?

A. 14.9 percent

B. 10.5 percent

C. 15.7 percent

D. 17.1 percent

__C_22. When unemployed people stop looking for jobs, the

A. unemployment rate decreases and the labor force increases.

B. unemployment rate increases and the labor force increases.

C. unemployment rate decreases and the labor force decreases.

D. unemployment rate increases and the labor force decreases.

_B__23. Cost-of-living adjustments

A. reduce the price effect of inflation.

B. allow individuals to maintain their purchasing power during inflation.

C. cause individuals to shorten their time horizons.

D. maintain constant real interest rates.

_D__24. Inflation affects production decisions because it

A, decreases input costs.

B. reduces speculation.

C. causes businesses to focus more on the future.

D. causes businesses to be more cautious since the future appears more uncertain.

_B__25. If inflation is 7.0 percent per year and you receive a 7.8 percent increase in your salary, then your

A. nominal income falls and real income rises.

B. nominal income rises and real income falls.

C. nominal income falls and real income falls.

D. nominal income rises and real income rises.

_B__26. Which of the following will cause the production possibilities curve to shift inward?

A. an increase in the working-age population

B. a decrease in the size of the labor force

C. a technological advance

D. an increase in knowledge

_D__27. Samantha recently quit her job at the university because she is looking for another job for which she is qualified in a small town. Samantha is

A. frictionally unemployed.

B. structurally unemployed.

C. a discouraged worker and is part of the unemployment statistic.

D. not part of the labor force and does not contribute to the unemployment rate.

_A__28. Which of the following is NOT directly included in the calculation of GDP?

A. The sale of used clothing.

B. The final sale of a new home.

C. The final sale of a car.

D. The final sale of new clothing.

Part II. Answer ONLY two of the following three questions. (15 points each)

1. Name and define/describe the three negative macroeconomic consequences of inflation.

1. Effects on Redistribution of income and wealth 2. Effects on production 3. Inflation affects the government in various ways.

2. Write an essay that explains the origins of Keynesian macroeconomics. Your essay should include Keynes' key ideas ("heresies") and how they were in opposition to the then dominant neoclassical economic theory.  Your answer must include two graphs: one for each theory (Keynesian and Neoclassical).

3. a) Define the U3 unemployment rate.

U3 in the most reported rate of unemployment in the United States and represents the number of people actively seeking a job.

b) Define the U6 unemployment rate. Explain why the U6 unemployment rate is usually about twice      the size of the U3 rate

U6 unemployment rate includes a whole swath of unemployed people namely everyone not listed in the u3 rate. That means the u6 rate is much truer to a natural, non-technical understanding of that it means to be unemployed. It includes people who have various reasons for not being able to get a job.