30 Multiple Choice Questions and 1 short answer/calculation questions. Points add up to 40 marks (30%).

Transcription

1 ASSUMPTION UNIVERSITY MARTIN DE TOURS SCHOOL OF MANAGEMENT AND ECONOMICS DEPARTMENT OF BUSINESS ECONOMICS MIDTERM EXAMINATION 1/2015 Course No. : ECO 2202/BG 2400 Macroeconomics Lecturer : Dr. Papar Kananurak Dr. Shih-tse Lo A. Chaichana P Pravesvararat A. Poonyawat Sreesing A. Zhuoran Zhang Date : October 9, 2015 Time : (2 Hours) 30 Multiple Choice Questions and 1 short answer/calculation questions. Points add up to 40 marks (30%). Name ID. SECTION Instructions: Answer all questions in the examination paper. Write your name, code and the section no. clearly otherwise your paper will not be graded. Calculators up to the model CASIO fx3800p or fx3800pv or equivalent are allowed. Assumption University Examination Regulations Students are required to strictly observe the following examination rules and regulations while examinations are in progress. Violating them will subject students to the following terms of punishment: F in the concerned subject; suspension from registering for classes in the following term(s) or academic year(s); or Dismissal from the University. 1. Do not bring into the examination room/hall the following items unless permission is stated on the examination cover sheet. any forms of information, related or unrelated to the examination. communication devices i.e. mobile telephones, PCT, PDA(s) etc. all types of calculators. dictionaries. Should students turn in the above materials to proctors before attempting their examination, the terms of punishment for cheating cases will not be applied to the students. The materials together with their names and admission codes, however will have to be submitted to the Office of Vice President for Student Affairs for official record purpose. 2. Do not leave the examination room during the first 30 minutes of the examination for whatever reason. Should the students need medical attention, students must request proctors to contact Examination Director for further assistance. 3. Do not leave the examination room without signing their names on the examination list. Violating this regulation so as to claim absence from the examination will subject students to the terms of punishment for cheating cases. 4 Do not communicate with other in the examination room without the proctor s permission. 5. Do not take question papers or any information pertaining the examination in any form, including students answers script outside the exam room. Proctors do not have any authority to give permission for the papers or information to be taken outside. 6. Do not remain in the hallway or in the corridor regardless of reasons while examinations are in progress. 7. Students must strictly follow the instructions of the proctors. No communication devices and PDA(s) in the examination rooms This is to remind students that the University s examination regulation prohibits the bringing of communication devices i.e. mobile phones, PCT, as well as PDA(s) Personal Digital Assistant into examination rooms irrespective of students reasons. Hence, to declare their intention of not using the devices during the examination, students who have brought into examination rooms these devices are expected to turn them off and place them on the floor under students desks or chairs at the beginning of the examination (within 5 minutes after the commencement of the examination) until the completion of the examination. Keeping them in pockets, pencil boxes or pouches, or placing them on their desks or nearby desks or chairs, even though they have already been turned off, are not acceptable and would subject students to the terms of punishment for cheating cases, ranging from F in the subject to one-year suspension. Committee for Supervising Examinations, Undergraduate Programs Total 7 Pages, Excluding This Page. This exam paper is ABAC s property and cannot be distributed or duplicated without proper authorization 0

2 PART I: MULTIPLE CHOICES. (30 MARKS) 1. Which of the following conditions would not be studied by the macroeconomist? 1) The level of national unemployment during ) The effect of government economic policy on the inflation rate during ) The effect of changing petroleum prices on the demand for coal. 4) The effect of lower income taxes on the rate of economic growth. 2. The CPI is a measure of the: 1) real wage. 2) price of a specific good or service. 3) rate of inflation. 4) average level of prices relative to prices in the base year 3. The labour force equals the number of people: 1) employed. 2) unemployed. 3) aged 15 years and older. 4) employed and unemployed. 4. If labour force in Utopia grows by 7 per cent and employment grows by 5 percent unemployment rate will: 1) increase by about 2 percent. 2) remain unchanged. 3) fall by about 2 percent. 4) rise by about 12 percent. 5. The circular flow without taxation, government spending and international trade, shows how real resources and financial payments flow between and. 1) government, firms 2) government, households 3) firms, government 4) firms, households 6. Your full-time accountant retires, so you hire a part-time accounting student at a much lower wage. As a result, GNP will: 1) rise. 2) remain unchanged. 3) fall. 4) none of the above. 7. By using the expenditures (aggregate expenditure) approach, GDP may be defined as: 1) GDP = C + I + (G - NX). 2) GDP = (C - I) + G + NX. 3) GDP = C + I + G + NX. 4) GDP = C + (I - G) + NX. This exam paper is ABAC s property and cannot be distributed or duplicated without proper authorization 1

3 8. Assuming a nominal GDP of $2 billion and a GDP deflator of 170, real GDP must be about: 1) $3.4 billion. 2) $1.2 billion. 3) $0.3 billion. 4) $3.7 billion. 9. Economic growth is measured by: 1) an increase in investment spending. 2) an increase in real GDP. 3) an increase in nominal GDP. 4) an increase in the GDP deflator. 10. The marginal propensity to consume (MPC): 1) shows how much income changes when consumption falls. 2) is always greater than one. 3) will be equal to one if the MPS is equal to one. 4) shows the proportion of an extra dollar of income that is spent on consumption. 11. In the absence of a government sector, household consumption expenditure is as follows: National Income Consumption $200 $ The marginal propensity to consume is: 1) ) ) ) The relationship between household saving and the household income is the: 1) consumption function. 2) savings function. 3) investment function. 4) aggregate demand function. 13. The arithmetic value of 1 - MPC equals: 1) the marginal propensity to invest. 2) the investment multiplier. 3) the marginal propensity to save. 4) the marginal propensity to tax. This exam paper is ABAC s property and cannot be distributed or duplicated without proper authorization 2

4 14. Other things constant, an increase in households' willingness to save more at every level of income will cause: 1) the consumption function to become flatter because the MPC rises. 2) the consumption function to make a downward parallel shift. 3) the consumption function to remain stationary but the saving function to shift upward. 4) the consumption function to become steeper because the MPC declines. 15. In the short run model equilibrium real GDP occurs when: 1) households spend all their income on consumption. 2) businesses cannot produce any more goods and services. 3) real GDP (Y) equals planned aggregate expenditure (AE). 4) business investment expenditure is zero. 16. In an economy without government or international trade (a) the marginal propensity to consume is 0.75, (b) consumption equals income at $120 billion, and (c) the level of investment is $40 billion. What is the equilibrium level of income? 1) $280 billion. 2) $320 billion. 3) $262 billion. 4) $198 billion. 17. The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment respectively. GDP(Y) Consumption( C) Investment( I) $0 $60 $ Saving (S) Equilibrium Y (= GDP) is: 1) $100. 2) $200. 3) $300. 4) $ If national income is $1500 billion and the level of planned spending by households and businesses is $1575 billion, then we can say that: 1) there will be an accumulation of inventories and output will rise. 2) there will be an accumulation of inventories and output will fall. 3) there will be an unplanned reduction in inventories and output will fall. 4) there will be an unplanned reduction in inventories and output will rise. This exam paper is ABAC s property and cannot be distributed or duplicated without proper authorization 3

5 19. In a simple economy with no government and no foreign trade, aggregate income is in equilibrium when: 1) tax revenues equal government spending. 2) planned savings equals planned investment. 3) planned investment equals planned consumption 4) consumption equals aggregate income. 20. A recession 1) is a decline in output. 2) runs from the peak to the trough of a business cycle. 3) is accompanied by rising unemployment 4) is all of the above. 21. If income is at a level at which planned saving is greater than planned investment, then: 1) income will rise. 2) income will fall. 3) income will not change, but saving will. 4) investment will rise. 22. Which of the following is an example of frictional unemployment? 1) Dave searches for a new job after voluntarily moving to San Diego. 2) Elaine is willing to work for less than the minimum wage, but employers cannot hire her. 3) Bill is qualified and would like to be an airline pilot, but airlines do not find it profitable to hire him at the wage established by the airline pilot's union. 4) Joan is willing to work at the going wage, but there are no jobs available. 23. If the MPC for the closed economy with no government is 0.8, the: 1) MPS is 1/0.8. 2) the multiplier is 5. 3) the multiplier is 8. 4) the MPS is An increase in taxes: 1) increases aggregate expenditure. 2) leaves aggregate expenditure unchanged. 3) decreases aggregate expenditure. 4) causes savings to increase. 25. In a simple economy, suppose that the government reduces its spending by $10 billion and as a result, equilibrium national income is reduced by $50 billion; the value of the multiplier: 1) is equal to 2. 2) is equal to -5. 3) is equal to -2. 4) is equal to 5. This exam paper is ABAC s property and cannot be distributed or duplicated without proper authorization 4

6 26. Fiscal policy refers to the: 1) manipulation of government spending and taxes to stabilize domestic output, employment, and the price level. 2) manipulation of government spending and taxes to achieve greater equality in the distribution of income. 3) altering of the interest rate to change aggregate demand. 4) fact that equal increases in government spending and taxation will be contractionary. 27. "Discretionary" fiscal policy is so named because it: 1) is undertaken at the option of the nation's central bank. 2) occurs automatically as the nation's level of GDP changes. 3) involves specific changes in T and G undertaken expressly for stabilization purposes at the option of Parliament. 4) is undertaken at the option of the United Nation. 28. The progressive income tax and unemployment compensation are examples of: 1) full-employment budgeting. 2) automatic stabilizers. 3) monetary policy. 4) a balanced budget multiplier. 29. The stock of outstanding government bonds is known as: 1) the national debt. 2) the budget deficit. 3) the medium term fiscal strategy. 4) the yellow brick road. 30. Which of the following best illustrates the concept of unemployment due to business cycles? 1) Ginny loses her job because of automated machinery. 2) Sam quits his job to look for work that is more fun. 3) Elle quits looking for work because she doesn t think she can find a suitable job. 4) Amanda loses her job because of a recession. This exam paper is ABAC s property and cannot be distributed or duplicated without proper authorization 5

7 PART 2: SHORT ANSWER/CALCULATION QUESTIONS. (10 MARKS) 1. CPI and Inflation (10 marks) Year Real GDP Consumer Price Index Labor Force Employment (2002 $) (2002=100) , ,593 16, , ,857 16, , ,125 16, What was the rate of growth of real GDP from 2010 to 2011? (1 mark) 1.2 What was the rate of growth of real GDP from 2011 to 2012? (1 mark) 1.3 What was the rate of inflation from 2010 to 2011? (1 mark) 1.4 What was the rate of inflation from 2011 to 2012? (1 mark) 1.5 What was the rate of growth of the labor force from 2010 to 2011? (1 mark) This exam paper is ABAC s property and cannot be distributed or duplicated without proper authorization 6

8 1.6 What was the rate of growth of the labor force from 2011 to 2012? (1 mark) 1.7 What was the rate of growth of employment from 2010 to 2011? (1 mark) 1.8 What was the rate of growth of employment from 2011 to 2012? (1 mark) 1.9 What was the unemployment rate in 2011? (1 mark1) 1.10 What was the unemployment rate in 2012? (1 mark1) END OF EXAM This exam paper is ABAC s property and cannot be distributed or duplicated without proper authorization 7