ECON 202 GMU Intermediate Macroeconomic Midterm Exam Questions

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Name: ________________________
ECON202
Midterm
Exam
Summer
Midterm Exam
Winter
Session2019
Islam Rizvanoghlu, PhD
Multiple Choice (3 points each)
Refer to the following figure when answering the next two questions.
Figure 5.6: Solow Diagram
____
1. Consider Figure 5.6. If KS K is the current capital stock in South Korea and KCH is the current capital stock
in China, according to the principle of transition dynamics:
a. China initially will grow faster than South Korea, but each will have the same steady
state
b. China initially will grow slower than South Korea, but each will have the same steady
state
c. China initially will grow faster than South Korea and will have a higher steady state
d. China initially will grow faster than South Korea and will have a lower steady state
e. Both South Korea and China initially will grow at the same rate and have the same
steady state
____
2. If the nominal GDP rises by 3 percent and the price level rises by 5 percent, then the real GDP
________ by ________.
a. rises; 8 percent
d. falls; 2 percent
b. falls; 8 percent
e. None of these answers are correct.
c. rises; 2 percent
1
Refer to the following figure when answering the next two questions.
Figure 5.3: Solow Diagram
____
3. In Figure 5.3, at K1 , the difference between sYand dK is ________ and the difference between Y
and sY is ________.
a. output; investment
d. output; consumption
b. net investment; consumption
e. depreciation; gross investment
c. gross investment; consumption
____
4. In the Solow model, if I t > dKt , the capital stock:
a.
b.
c.
____
____
5. The
a.
b.
c.
declines
stays the same
grows
Solow model of economic growth:
endogenizes labor
endogenizes physical capital
exogenizes physical capital
d.
e.
Not enough information is given.
None of these answers are correct.
d.
e.
exogenizes investment
endogenizes investment
6. ________ variables are parameters to the model and generally are fixed over time, while ________
variables are the outcome of the model.
a. Shocks; parameters
d. Exogenous; endogenous
b. Endogenous; exogenous
e. Parameters; system
c. Endogenous; shocks
2
Refer to the following figure when answering the next five questions.
Figure 5.1: Solow Diagram
____
7. In Figure 5.1, the capital stock at K1 is not the steady state because:
a. the saving rate is too low
b. the saving rate is too high
c. the depreciation rate is too low
d. gross investment is higher than capital depreciation
e. gross investment is lower than capital depreciation
____
8. Which of the following does macroeconomics NOT endeavor to answer?
i. Why is the typical person in the United States today more than ten times richer than the
typical person a century ago?
ii. Why has the unemployment rate been nearly twice as high in Europe as in the United States in
recent years?
iii. Why has the price of orange juice risen sharply?
a.
b.
c.
____
ii and iii
i only
ii only
d.
e.
i, ii, and iii
iii only
9. By how much does the current GDP rise in the following scenario? A real estate agent sells a house for
$250,000 that the previous owners had purchased 10 years earlier for $90,000. The real estate agent
earns a commission of $10,000.
a. $160,000
d. $90,000
b. $250,000
e. $260,000
c. $10,000
____ 10. According to the constant growth rate rule, if a variable starts at some initial value y0 at t = 0 and grows
t
at y t =y 0 (1 + g) at a constant rate g, then the value of the variable in three periods is given by:
a.
y 3 = y 0 (1 ? g )
b.
y t = y 0 (1 + g )
c.
y 3 = y 0 (1 + g )
3
t
d.
y 3 = y 0 (1 + 3g )
e.
y 3 = 3y 0 (1 ? g )
3
3
____ 11. The
a.
b.
c.
two main inputs we consider in a simple production function are:
land and labor
d. utilities and capital
capital and land
e. natural resources and labor
capital and labor
____ 12. Consider two economies. If each country has
capital and labor, the country that ________
a. is less productive
b. is more productive
c. has more natural resources
the same production function and the same amount of
produces more.
d. has lower costs of production
e. has more workers
____ 13. If MPL < w, the firm: a. has the optimal amount of labor b. should fire some labor until MPL = w c. should fire some labor until MPL = 0 d. should hire more capital until MPK = 0 e. should hire more capital until MPL = w ____ 14. As an economist working at the International Monetary Fund, you are given the following data for South 1/3 Africa: predicted per capita GDP, relative to the United States, as given by y = k , is 0.55, and total factor productivity is 0.33. What is the observed per capita GDP, relative to the United States? a. 0.54 d. 0.88 b. 1.68 e. 0.18 c. 0.82 ____ 15. In economics, a nonrival good is one that: a. cannot be consumed by more than one person at a time b. can be consumed by more than one person at a time c. can be consumed by more than one person at a time but is congested d. cannot be consumed by more than two persons at a time e. None of these answers are correct. 1 3 ____ 16. With the production function Yt = At K t production. a. capital b. capital and the stock of ideas c. capital and labor ____ 17. The a. b. c. d. e. 2 3 Lt , if we double ________, we have an increasing returns d. e. capital, labor, and the stock of ideas labor and the stock of ideas reason perfect competition cannot generate new ideas is that: profits are positive perfectly competitive firms have no ideas profits are zero firms are too small to generate ideas revenues are positive 4 ____ 18. In the Romer model, the more labor you dedicate to generating ideas, ________ but ________. a. the faster you accumulate knowledge; at a loss to current output in the consumption sector b. the faster you accumulate knowledge; at a gain to current output in the consumption sector c. the slower you accumulate knowledge; at a loss to current output in the consumption sector d. the less you accumulate knowledge; at a gain to current output in the consumption sector e. the more knowledge you lose; at a gain to current output in the consumption sector ____ 19. In the Romer model, ________ is the driving force behind sustained ________ economic growth. a. labor; long-term d. capital; short-term b. knowledge; short-term e. capital; long-term c. knowledge; long-term ____ 20. A balanced growth path is defined as a situation in which: a. the output growth rate is zero b. the growth rates of all endogenous variables are variable c. the growth rates of some of the endogenous variables are constant d. the growth rates of all endogenous variables are constant e. All of these answers are correct. Refer to the following table when answering the following questions. Table 2.1: U.S. 2010 and 2015 Expenditures ($ billions) 2010 10,202 3,363 6,839 2,101 2,039 1,658 381 62 –513 1,852 2,365 3,174 1,304 1,870 Personal consumption expenditures Goods Services Gross private domestic investment Fixed investment Nonresidential Residential Change in private inventories Net exports of goods and services Exports Imports Government consumption Federal State and local 2015 12,284 4,012 8,272 3,057 2,963 2,311 652 93 –522 2,264 2,786 3,218 1,225 1,993 ____ 21. Consider Table 2.1. Total GDP in 2015 was about ________ billion. a. $44,609 d. $18,037 b. $18,830 e. $20,391 c. $14,818 5 ____ 22. Which of the following does NOT count toward changes in the current GDP? a. A student pays for another year of tuition. b. You buy a used car from your parents. c. The local police station buys new squad cars. d. The Pentagon buys gasoline. e. None of these answers is correct. Short Answer (7 points each) 1 /3 1. Given a production function Yt = AK t L 2 /3 , if K 0 =8, A = 2, L = 4, s = 0.2, and d = 0.05: (a) Calculate the steady-state level of capital and output. (b) Calculate K 1 , I 1 , Y 1 and C 1 . . 6 2. Discuss how the economy (output, output per person, ideas) will react to a decrease in the fraction of labor working for the ideas sector within a Romer model. Illustrate your answer graphically. . 3. Discuss how the economy (investment, output and capital) will react to a decrease in depreciation rate within a standard Solow model. Illustrate your answer graphically. . 7 4. Consider the following Romer model of economic growth: Yt = At Lyt ? At = zAt Lt Lat + Lyt = L Lat = ™ L (a) If A 0 = 100, ™ = 0.1, z = 1/3000 and L = 1, 000, what is the growth rate of knowledge in this economy? . (b)What is the growth rate of per capita output in this economy? . (c) Using the information from year 1, what is the level of per capita output in this economy in year 5? . 5. You are a staff economist for your local bank and the bank manager claims that in 2014 the Chinese economy was bigger than that of the United States. To prove him wrong you decide to put your economics training to work for you and decide to show him China’s GDP in U.S. dollars; to show him how smart you are, you also decide to calculate the real GDP of China in U.S. dollars and prices and compare that to the United States as well. You have the following data: in 2014, China’s nominal GDP was CY 63.6 trillion (CY = Chinese yuan); the yuan-dollar exchange rate was CY 6.14/$1; nominal GDP in the United States was $17.3 trillion; the price level in the United States was 1.0 and the price level in China was 0.6. How big is China’s economy? 8 Purchase answer to see full attachment Tags: GDP production function intermediate macroeconomic User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.