ECON 1002 B. Come to the PASS workshop with your mock exam complete. During the workshop you can work with other students to review your work.

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1 It is most beneficial to you to write this mock midterm UNDER EXAM CONDITIONS. This means: Complete the midterm in 1 hour(s). Work on your own. Keep your notes and textbook closed. Attempt every question. After the time limit, go back over your work with a different colour or on a separate piece of paper and try to do the questions you are unsure of. Record your ideas in the margins to remind yourself of what you were thinking when you take it up at PASS. The purpose of this mock exam is to give you practice answering questions in a timed setting and to help you to gauge which aspects of the course content you know well and which are in need of further development and review. Use this mock exam as a learning tool in preparing for the actual exam. Please note: Come to the PASS workshop with your mock exam complete. During the workshop you can work with other students to review your work. Often, there is not enough time to review the entire exam in the PASS workshop. Decide which questions you most want to review the Facilitator may ask students to vote on which questions they want to discuss in detail. Facilitators do not bring copies of the mock exam to the session. Please print out and complete the exam before you attend. Facilitators do not produce or distribute an answer key for mock exams. Facilitators help students to work together to compare and assess the answers they have. If you are not able to attend the PASS workshop, you can work alone or with others in the class. Good Luck writing the Mock Exam!! Dates and locations of mock exam take-up: Saturday, February 2 Patterson Hall pm & Sunday, February 3 Patterson Hall pm

2 1. Which of the following is the best single measure of an economy s well-being? a) inflation rate b) trade balance c) unemployment rate d) gross domestic product 2. Jelena, a Canadian citizen, works only in Spain. The value she adds to production in Spain is included: a) in Spanish GDP, but not included in Canadian GDP b) Canadian net exports are unaffected, but Canadian GDP decreases c) Canadian net exports and Canadian GDP are unaffected d) Canadian net exports decrease, but Canadian GDP is unaffected 3. Which of the following would be included in the investment component of Canadian GDP? a) purchases of Canadian stocks and bonds b) purchases of capital equipment c) purchases by US citizens of Canadian stocks and bonds d) purchases of new cars built in the US by Canadian workers 4. The country of Amazonia does not trade with any other country. Its GDP is $20 billion. Its government collects $4 billion in taxes and pays out $3 billion to households in the form of transfer payments. Consumption equals $15 billion, and investment equals $2 billion. What is the value of the goods and services purchased by the government of Amazonia? a) $19 billion b) $3 billion c) $5 billion d) $17 billion 5. How are nominal and real GDP related? a) nominal GDP measures current production using current prices, while real GDP measures base-year production using base-year prices b) nominal GDP measures current production using base-year prices, while real GDP measures current production using current prices c) nominal GDP measures base-year production using base-year prices, while real GDP measures current production using current prices d) nominal GDP measures current production using current prices, while real GDP measures current production using base-year prices

3 6. Over the past few decades, Canadians have chosen to cook less at home and eat more at restaurants. How has this trend affected GDP? a) it has increased measured GDP b) it has reduced measured GDP c) it has not affected measured GDP d) it has had an ambiguous effect on GDP 7. Use the information provided in the table below to answer this question. YEAR 2010 (base year) Price of Cheese Quantity of Cheese Price of Cracker Quantity of Crackers $2 150 $ $3 200 $4 150 a) In 2010, nominal GDP is $500, real GDP is $50, and the GDP deflator is 50 b) In 2011, nominal GDP is $1200, real GDP is $50, and the GDP deflator is 171 c) In 2010, nominal GDP is $500, real GDP is $350, and the GDP deflator is 200 d) In 2011, nominal GDP is $1200, real GDP is $500, and the GDP deflator is Which of the following is an important different between the GDP deflator and the consumer price index? a) the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers b) the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of some goods and services bought by consumers c) the GDP deflator reflects the prices of all final goods and services produced by a nation s citizens, whereas the consumer price index reflects the prices of final goods and services bought by consumers d) the GDP deflator reflects the prices of all goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of final goods and services bought by consumers 9. Let s say that a bag of Lays chips cost 20 cents in Let s also that we also know the CPI for 1975 and the CPI for today. Which of the following would you use to compute the price of the

4 candy bar in today s prices? a) 20 cents x (1975 CPI/today s CPI) b) 20 cents x (1975 CPI/today s CPI-1975 CPI) c) 20 cents x (today s CPI/1975 CPI) d) 20 cents x today s CPI 20 cents x 1975 CPI 10. Which one of the following statements best defines indexation? a) it s a process of adjusting the nominal interest rate so that it is equal to the real interest rate b) it s the use of a law or contract to automatically correct a dollar amount for the effects of inflation c) it s the use of a price index to deflate dollar values d) it s an adjustment made by Statistics Canada to the CPI so that the index is in line with the GDP deflator 11. Refer to the table below. The typical household in this country buys 4 loaves of bread, 2 pounds of cream cheese, and 8 books each week. The prices are given in the table below. Using 2016 as the base year, what would the CPI in 2017 be? YEAR Price of a loaf of bread Price of a pound of cream Price of a book cheese 2015 $1 $3 $ $2 $6 $ $3 $6 $25 a) 124% b) 50 c) 124 d) 120% 12. By failing to account for the possibility of consumer substitution, how is CPI biased? a) it overstates the cost of living because people have higher incomes and perceive formerly luxury goods as necessities b) it overstates the cost of living because people buy more of the cheaper goods c) it understates the cost of living because buy more of the newer goods

5 d) it understates the cost of living because people have higher incomes and perceive some goods as inferior 13. Diminishing returns to physical capital implies that when the human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to a) negative productivity b) a decrease in productivity c) a larger increase in productivity d) a smaller increase in productivity 14. Which of the following best defines the catch-up effect? a) if investment spending is low, increased saving will help investment to catch up b) rich countries help relatively poor countries to help them catch up c) it is easier for a country to grow fast and catch up with richer countries if it starts out relatively poor d) saving will always catch up with investment spending 15. Which of the following best defines productivity? a) productivity is the ability of a company to generate profit b) productivity is the quantity of goods and services that a nation can produce in a year c) productivity is the quantity of goods and services that a worker can produce in one hour d) productivity is the ability of a company to produce goods and services 16. Which of the following best describes changes in the average well-being in a country? a) the growth rate of government transfers b) the growth rate of nominal GDP c) the growth rate of real GDP d) the growth rate of real GDP per person 17. The four determinants of productivity are: a) worker health, working conditions, technological knowledge, and natural resources b) human capital, natural resources, technological knowledge, and physical capital c) natural resources, capital, technology, and worker education d) worker education, natural resources, technology, and capital 18. In the 1800s, Europeans purchased stock in Canadian companies, which used the funds to build railroads and factories. What type of investments did the Europeans make? a) foreign portfolio investments b) foreign capital investments c) foreign direct investments

6 d) foreign indirect investments 19. Which of the following would most likely happen in the market for loanable funds if the government were to increase the tax on interest income? a) interest rates would fall and savings would rise b) both interest rates and savings would fall c) both interest rates and savings would rise d) interest rates would rise an savings would fall 20. Suppose a country repeals its investment tax credit. Which of the following is most likely to happen in the market for loanable funds? a) the demand for and the supply of loanable funds would shift to the right b) the demand for and supply of loanable funds would shift to the left c) the supply of loanable funds would shift to the right, and the demand for loanable funds would shift to the left d) the supply of loanable funds would remain unchanged, and the demand for loanable funds would shift to the left 21. As an economist, you and are asked to speak on the effects of an increase in in the government surplus. Which of the following statements would you say? a) the debt and interest rates will rise b) the debt and interest rates will fall c) the debt will rise, and interest rates will fall d) the debt will fall, and interest rates will rise 22. Suppose that Parliament were to institute an investment tax credit. Which of the following would most likely happen in the market for loanable funds? a) the demand for loanable funds would shift left b) the supply of loanable funds would shift left c) the demand for loanable funds would shift right d) the supply of loanable funds would shift right 23. In a closed economy, what does (T-G) represent? a) national saving b) investment c) private saving d) public saving 24. Which of the following equations represents GDP in an open economy? a) S= I-G

7 b) I= Y-C+G c) Y= C+I+G d) Y= C+I+G+NX 25. How is a university student who is not working or looking for a job counted? a) as neither unemployed nor part of labour force b) as unemployed and in the labour force c) as unemployed, but not in the labour force d) as employed and in the labour force 26. How is the unemployment rate computed? a) by counting the number of unemployment insurance claims filed b) by dividing the number of unemployed by the number of people in the labour force c) by determining the number of unemployed in the population aged 18 and older d) by counting the number of working-age persons who don t have a job 27. Nancy is searching for a job that suits her tastes about where to live and the people she works with. Laura is looking for a job that makes best use of her skills. Which of the following best describes the nature of Nancy and Laura s unemployment? a) Nancy and Laura are both frictionally unemployed b) Nancy and Laura are both structurally unemployed c) Nancy is frictionally unemployed, and Laura is structurally unemployed d) Nancy is structurally unemployed, and Laura is frictionally unemployed 28. Which of the following best defines collective bargaining? a) it s the process by which the government sets exemptions from the minimum-wage law b) it s setting the same wage for all employees to prevent jealousy among workers c) it s the situation when firms collude to set the wages of employees in order to keep them below the equilibrium d) it s the process by which unions and firms agree on the terms of employment 29. Maya loses her job and decides to sit around at home for a few months. Assuming that other things remain the same, what happens to the unemployment rate? a) the unemployment rate decreases because he is not in the labour force anymore b) the unemployment rate increases because he is still in the labour force anymore c) the unemployment rate decreases because he is still in the labour force anymore d) the unemployment rate increases because he is not in the labour force anymore

8 30. Regarding the categories of unemployment, how does a minimum wage law compare to firms paying higher-than-equilibrium wages? a) the minimum wage creates frictional unemployment, while firms paying wages above equilibrium create structural unemployment b) the minimum wage creates structural unemployment, while firms paying wages above equilibrium create frictional unemployment c) the minimum wage and firms paying wages above equilibrium both create structural unemployment d) the minimum wage and firms paying wages above equilibrium both create frictional unemployment