ECON 1000 (Fall 2017 Section 07) Exam #2C Multiple Choice Questions: (3 points each) 1. I am taking of the exam. C. Version C 2. As discussed in lecture, society can achieve economic growth by A. replacing market based economic institutions with mechanisms of command planning. B. realizing an improvement in technology. C. making deliberate investments in human capital and physical capital. D. More than one (perhaps all) of the above answers is correct. 3. Gross Domestic Product can be expressed by the following formula:. A. Y = C I G NX B. Y = C + I + G + NX C. Y = (C + I) (G + NX) D. Y = 72 X 4. refers to the logical error whereby someone incorrectly concludes that simply because there are benefits (to some people) from higher levels of an activity, that more of the activity is always better. A. The Open-Ended Fallacy B. Deadweight Loss C. Monopoly D. Market Failure 5. The function of government can be described as attempts by government to minimize fluctuations in overall macroeconomic activity. A. Distribution B. Stabilization C. Allocation D. Taxation 6. Consider a market in which the maximum possible value of Total Social Surplus is $2,500,000. If the realized level of Total Social Surplus is $2,200,000, then Deadweight Loss in this market is equal to. A. $4,700,000 B. $300,000 C. $ 300,000 (i.e., negative $300,000) D. None of the above answers are correct (since more information is needed in order to determine the value of Deadweight Loss in this market). 7. The Expanded Circular Flow Diagram builds upon the Basic Circular Flow Diagram by A. adding an illustration of the role of the central bank. B. adding an illustration of the role of labor unions and monopolies. C. adding an illustration of the role of government and the foreign sector. D. eliminating the illustration of the role of money.
8. A situation in which the sum of gains and losses over all people is negative in value is defined as a A. positive-sum environment. B. negative-sum environment. C. win-lose outcome. D. lose-lose outcome. 9. Government Spending as a Percentage of GDP in the United States is projected to A. decrease to less than 30% by 2020. B. remain at roughly 40% for the next several years. C. increase to roughly 70% by 2020. D. increase to 55% by 2018 and then decrease to 35% by 2020. 10. In 2008 Zimbabwe experienced an annual inflation rate of 12,563%. This is an example of A. the vicious-cycle-of-poverty hypothesis. B. the Rule of 72. C. deflation. D. hyperinflation. For questions 11 and 12 refer to the graph below, which illustrates Marginal Benefits and Marginal Costs for society when varying percentages of the population have access to Good Y. As illustrated: both Marginal Benefits and Marginal Costs are always positive; Marginal Costs are always increasing; and Marginal Benefits are maximized when 23% of the population has access to the good. Under current, existing government policies and market conditions, 36% of the population has access to this good. $ MB MC Marginal Costs (MC) Marginal Benefits (MB) 0 % of Population with Access 0 23 36 59 100 11. At the current outcome (i.e., when 36% of the population has access to the good) A. Deadweight Loss is zero, since the efficient level of consumption is realized. B. Deadweight Loss is positive due to too much consumption. C. Deadweight Loss is positive due to too little consumption. D. Deadweight Loss is negative due to too little consumption. 12. Total Social Surplus would be maximized if of the population had access to this good. A. 100% B. 59% C. 36% D. 23%
13. The Unemployment Rate is defined as the A. percentage of the people in the labor force that currently does not have a job. B. percentage of the total adult population that currently does not have a job. C. percentage of the able-bodied adult male population that currently does not have a job. D. percentage of people in the labor force that currently has a job but who feel undercompensated or unappreciated at work. 14. Logan recently bought a rare comic book at the mall for $15. His reservation price as a buyer of this item was $20. From these values it follows that his Consumer s Surplus from making this purchase was. A. $35 B. $20 C. $5 D. $5 (i.e., negative five dollars) 15. A firm operating in a Perfectly Competitive Market has No Market Power, which implies that the firm A. would lose all its customers if it attempted to increase price above the prevailing market price. B. faces a vertical demand curve for its output. C. must decrease its price in order to increase the quantity of output sold. D. More than one (perhaps all) of the above answers is correct. 16. The Great Misery refers to the period of time A. when Donald Trump was initially President, when the value of the Dow Jones Industrial Average decreased in value by 46.2% in less than two months. B. Ronald Reagan was initially President, when the GDP growth rate was negative for 14 consecutive quarters (i.e., three and a half straight years). C. from November 1973 through June 1983 when the sum of the unemployment rate and inflation rate was 12.50 or higher for 116 consecutive months. D. from the early 1950s through the late 1960s when the U.S. experienced abnormally high inflation rates. For question 17, consider the table below which is a partial summary of the socioeconomic quality of life measures discussed in lecture. Country Life Expectancy Infant Mortality Average Annual GDP Per Capita at Birth Rate Work Time (PPP) Japan 84.46 2.13 1,719 $38,200 Country W 80.44 3.46 1,371 $47,400 South Korea 79.80 3.93 2,113 $36,500 Country X 79.56 6.17 1,790 $56,300 Country Y 76.65 6.19 1,963 $26,500 Mexico 75.43 12.58 2,246 $18,500 Country Z 70.16 7.08 1,978 $23,700 17. The United States is A. Country W B. Country X C. Country Y D. Country Z
18. Lower income countries which are held back by some combination of poor economic institutions, undeveloped industrial capital, and an uneducated/unskilled workforce (such as Ghana, India, Bangladesh, and the Democratic Republic of the Congo) are referred to as A. Industrially Advanced Countries. B. Economically Inferior Countries. C. Corrupt Countries. D. Less Developed Countries. 19. Focusing on GDP Growth Rates between 1970 and 2014, grew at an average rate of 9.29% per year over this entire 45 year period. A. Brazil B. China C. The United States D. Mexico For Questions 20 and 21, consider a monopolist facing Demand and with Marginal Costs and Marginal Revenue as illustrated below. $ 14.25 9.75 a b Marginal Costs of Production 6.50 c d e f 4.25 g 2.50 h Demand 0 quantity 0 Marginal Revenue 5,000 8,250 9,750 20. To maximize profit, this firm should charge a price of. A. $14.25 B. $9.75 C. $6.50 D. $4.25 21. When this monopolist sets the price and sells the quantity which maximizes her profit, Total Consumers Surplus is equal to and Deadweight Loss is equal to. A. areas (a)+(b)+(c)+(d) ; areas (g) and (h). B. areas (a)+(b)+(c)+(d) ; areas (e) and (f). C. areas (a)+(b) ; areas (e) and (f). D. zero; area (g).
22. In 2015, Nominal GDP in the United States was the value of Nominal GDP in the United States in 1915. A. 7.5% less than B. 460.2 times larger than C. 18.8 times larger than D. 6.8 times larger than 23. provides a measure of the total value of all final goods/services produced within an economy in a given period of time, with all goods/services valued according to current period prices, whereas provides a measure of the total value of all final goods/services produced within an economy in a given period of time, with all goods/services valued according to a single set of common, constant prices. A. Nominal GDP; Real GDP. B. Nominal GDP; Imaginary GDP. C. Imaginary GDP; Real GDP. D. Real GDP; Nominal GDP. 24. Focusing on the Unemployment Rate in the United States (reported on a monthly basis) since January 1948, the longest stretch of time for which the realized rate was 8% or higher was the A. 70 month period from August 1982 through May 1988. B. 43 month period from February 2009 through August 2012. C. 16 month period from March 1964 through June 1965. D. 7 month period from November 1952 through May 1953. For questions 25 through 27, consider a country with realized rates of inflation, unemployment, and GDP growth between 2013 and 2016 as summarized in the table below. 2013 2014 2015 2016 Inflation Rate 2.2% 1.3% 0.5% 1.5% Unemployment Rate 5.8% 7.2% 5.5% 4.7% Real GDP Growth Rate 1.3% 1.2% 2.7% 4.0% 25. In which year was the Misery Index greatest in value? A. 2016. B. 2015. C. 2014. D. 2013. 26. In which year did this country realize deflation? A. 2013. B. 2014. C. 2015. D. 2016. 27. If this country grew indefinitely in the future at the rate at which it grew in 2016, its value of Real GDP would double in approximately years. A. 18 B. 25 C. 48 D. 72
28. Capital flight refers to A. basic infrastructure, such as railways, roads, telecommunications networks, and water supply systems. B. the incentive for crony capitalists to fly to a country s capital in order to lobby legislators and bureaucrats for preferential treatment from the government. C. the tendency for wealthy people in poor countries to invest their financial resources abroad instead of at home. D. None of the above answers are correct 29. The efficient level of trade is defined as the level of trade which A. maximizes Total Social Surplus. B. maximizes Total Consumers Surplus. C. maximizes Total Producers Surplus. D. maximizes the difference between Total Consumers Surplus and Total Producers Surplus. 30. Market Failure can be described as a situation in which A. a negative GDP growth rate is realized for more than six consecutive months. B. government intervention leads to a greater Deadweight-Loss than does the free market outcome. C. the free market outcome is NOT efficient. D. a single seller of a good has substantial control over the price of the good. 31. The value of Per Capita GDP in the United States is about the value of Per Capita GDP in the European Union. A. 3.5% lower than B. 104.8% higher than C. 48.9% higher than D. 1.2% higher than For questions 32 and 33, consider a country with consumption expenditures, private investment expenditures, government purchases, exports, and imports as summarized in the table below (each measured in billions of Euros), plus current population: Consumption Investment Government Exports Imports Population Expenditures Expenditures Purchases 1,384 216 375 187 162 50,000,000 32. For this country Net Exports are equal to. A. 1,975 billion (i.e., 1.975 trillion Euros) B. 349 billion C. 25 billion D. 25 (i.e., negative 25 billion Euros) 33. For this country, Gross Domestic Product Per Capita is equal to. A. 40,000 B. 39,500 C. 39,000 D. 32,000
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