Directions: Answer each question. Choose the answer that best answers the question. You have 40 minutes. You can not go back to a question you have already
seen.
Question 1
Consider the following model of the labour market:
Labour supply:
Labour demand:
The endogenous variables are
a) and
b) and the equilibrium wage,
c) and the equilibrium wage,
d) the equilibrium quantity of labor, , and wage,
e) and the equilibrium quantity of labor,
Question 2
Nominal gross domestic product is defined as:
a) the value of all goods and services produced by an economy, within its borders,
over a period of time, at base-year prices.
b) the value of all goods produced by an economy, within its borders, over a period
of time, at current prices.
c) the value of all goods and services produced by an economy, within its borders,
over a period of time, at current prices.
d) the value of all goods and services produced by an economy’s citizens, regardless
of where they live, over a period of time, at current prices.
e) the value of all goods and services produced by an economy’s citizens, regardless
of where they live, over a period of time, at base-year prices.
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Question 3
Consider the following national income account of a country that only produces
almonds and DVDs:
2004 2005
Quantity of almonds 1 000 1 100
Quantity of DVDs 500 500
Price of almonds $1 00 $1 50
Price of DVDs $15 00 $14 75
Using the Laspeyres index, the percent change in real GDP was about:
a) 6 percent
b) 5 percent
c) 0 percent
d) 1 percent
e) Not enough information is given.
Question 4
According to historical data, the wages in ancient Greece and Rome were __________
in sixteenth century Britain or eighteenth-century France.
a) somewhat lower than
b) a lot higher than
c) a lot lower than
d) about the same as
e) none of the above
Question 5
Suppose grows at a rate = 3 percent and grows at a rate = 12 percent;
if = 1 3
2 3, then grows at:
a) 5 percent.
b) 15 percent.
c) 9 percent.
d) 4 percent.
e) 3 percent.
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Question 6
Consider two economies. If each country has the same production function and
the same amount of capital and labor, the country that __________ produces
more.
a) is less productive
b) is more productive
c) has more natural resources
d) has lower costs of production
e) has more workers
Question 7
Consider the following figure:
The shape of this production function suggests:
a) a constant marginal product of capital.
b) a diminishing marginal product of capital.
c) a diminishing marginal product of labour.
d) an increasing marginal product of capital.
e) Not enough information is given.
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Question 8
In the Cobb-Douglas production function = 1 3 2 3, labor’s share of GDP is
__________.
a) two-thirds regardless of how much labor there is
b) two-thirds but can change as more laborers are added
c) one-third regardless of how much labor there is
d) always equal to one
e) Not enough information is given.
Question 9
Vickie earns $1000 per week and spends $850 per week on living expenses, puts
$50 in a saving account and buys $100 worth of shares in a stock mutual fund. Vickie’s
saving is ____ and her saving rate is _____.
a) $50; 5.9%
b) $100; 10%
c) $100; 11.8%
d) $150; 15%
e) none of the above
Question 10
Which of the following is/are the benefit(s) of economic gro
wth
a) an expansion in the range of goods and services available
b) shorter expected life spans
c) less pollution
d) lower government deficits
e) a more stable exchange rate
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Question 11
Consider the following table:
In January 2007, the unemployment rate was:
a) about 4.8 percent.
b) about 4.6 percent.
c) about 33.8 percent.
d) about 3.0 percent.
e) about 9.0 percent.
Question 12
The demand for labor curve is:
a) ad hoc.
b) derived from the firm’s profit maximization problem.
c) equal to the average product of labor.
d) derived from the marginal product of labor.
e) Both b and d are correct.
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Question 13
If the nominal GDP rises by 6 percent and the price level rises by 3 percent, then
the real GDP ________ by ________ percent.
a) falls; 3
b) rises; 9
c) rises; 3
d) falls; 9
e) Not enough information provided.
Question 14
When using the expenditure approach, investment includes
a) household residential expenditures.
b) firm structures, equipment, and inventories.
c) fixed firm and household structures, equipment, and inventories.
d) government and firm equipment expenditures.
e) government defense and firm equipment expenditures.
Question 15
Which of the following counts toward changes in the current GDP
a) A student buys another year of tuition.
b) You purchase a used stereo from a friend.
c) The government builds a new highway.
d) You fix your own sink.
e) a) and c)
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Question 16
In dynamic economies, it is true that economic growth may contribute to ________,
but it also leads to ________.
a) unemployment; inflation
b) higher living standards; inadequate wealth redistribution
c) job destruction; job creation
d) crime; unemployment
e) pollution; price instability
Question 17
A production function exhibits constant returns to scale if when you
a) hold inputs constant–you double the output.
b) double each input–you more than double the output.
c) double each input–you less than double the output.
d) double one input–you double the output.
e) double each input–you double the output.
Question 18
If ( denotes the marginal product of capital and the real
interest rate), the firm
a) should hire more labor.
b) should hire more capital until = 0.
c) should get rid of some capital until = .
d) should hire more capital until = .
e) has the optimal amount of capital.
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Question 19
In the Solow model, the steady-state capital stock is a function of
a) productivity and the initial capital stock.
b) the initial capital stock, productivity, and the saving rate.
c) the initial capital stock, productivity, and the depreciation rate.
d) the labor stock and the steady-state level of capital stock.
e) productivity, the depreciation rate, the labor stock, and the saving rate.
Question 20
Because in many industries the cost of generating new ideas is so high, firms must
charge a price ________ cost.
a) equal to the marginal
b) higher than the marginal
c) lower than the marginal
d) equal to the average fixed
e) lower than the average fixed
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