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ECON 102-MIDTERM I-PRACTICE
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ECON 102-MIDTERM I-PRACTICE
- University of California, Los Angeles
- Econ 102 - Macroeconomic Theory
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Econ 102 Midterm 1 Quizlet
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UCLA ECON 102 SPR 14 PRACTICE QUESTIONS FOR MIDTERM I 1 Hyperinflations ultimately are the result of excessive growth rates of the money supply the underlying motive for the excessive money growth rates is frequently a government s A desire to increase prices throughout the economy B need to generate revenue to pay for spending C responsibility to increase nominal interest rates by increasing expected inflation D inability to conduct open market operations 2 Consider the money demand function that takes the form M P d kY where M is the quantity of money P is the price level k is a constant and Y is real output If the money supply is growing at a 10 percent rate real output is growing at a 3 percent rate and k is constant what is the average inflation rate in this economy A 3 percent B 7 percent C 10 percent D 13 percent 3 The demand for loanable funds is equivalent to A national saving B private saving C public saving D investment 4 Assume that equilibrium GDP Y is 5 000 Consumption C is given by the equation C 500 0 6 Y T Taxes T are equal to 600 Government spending is equal to 1 000 Investment is given by the equation I 2 160 100r where r is the real interest rate in percent In this case the equilibrium real interest rate is A 5 percent B 8 percent C 10 percent D 13 percent Page 1 5 If output is described by the production function Y AK 0 2L0 8 then the production function has A constant returns to scale B diminishing returns to scale C increasing returns to scale D a degree of returns to scale that cannot be determined from the information given 6 In fourteenth century Europe the bubonic plague A reduced the population of Europe by about one half B substantially increased economic output in Europe C substantially increased real rentals on land in Europe D substantially increased real wages in Europe 7 To reduce the money supply the Federal Reserve A buys government bonds B sells government bonds C creates demand deposits D destroys demand deposits 8 A bank balance sheet consists of only the following items Deposits 1 000 Reserves 100 Securities 400 Debt 500 Loans 2 000 What is the value of bank capital A 1 000 B 500 C 1 000 D 1 500 9 The ex ante real interest rate is based on inflation while the ex post real interest rate is based on inflation A expected actual B core actual C actual expected D expected core Page 2 10 In the long run according to the quantity theory of money and the classical macroeconomic theory if velocity is constant then determines real GDP and determines nominal GDP A the productive capability of the economy the money supply B the money supply the productive capability of the economy C velocity the money supply D the money supply velocity 11 In the classical model what adjusts to eliminate any unemployment of labor in the economy A the average price level B the interest rate C the real rental price of capital D the real wage 12 The real interest rate is the A rate of interest actually paid by consumers B rate of interest actually paid by banks C rate of inflation minus the nominal interest rate D nominal interest rate minus the rate of inflation 13 When a pizza maker lists the price of a pizza as 10 this is an example of using money as a A store of value B unit of account C medium of exchange D flow of value 14 In a fractional reserve banking system banks create money when they A accept deposits B make loans C hold reserves D exchange currency for deposits 15 According to the Fisher effect the nominal interest rate moves one for one with changes in the A inflation rate B expected inflation rate C ex ante real interest rate D ex post real interest rate Page 3 16 If the consumption function is given by C 500 0 5 Y T and Y is 6 000 and T is given by T 200 0 2Y then C equals A 2 500 B 2 800 C 3 500 D 4 200 17 Into which of the three categories employed unemployed out of the labor force would an interviewer for the Current Population Survey place each of the following people Explain a Jennifer Temple is working as a second grade schoolteacher b Frank Peabody is attending college full time to earn a degree in elementary education c Martin Hampton is working as a high school social science teacher but is at home sick with the flu d Kyle Brown does not currently have a job He wants to be an elementary school teacher He has the appropriate degree He has not looked for a position in the last month because he doesn t believe schools are currently hiring e Brenda Dewey does not currently have a job She has sent her resume to several school districts in the past week in hope of finding a teaching position 18 In classical macroeconomic theory the concept of monetary neutrality means that changes in the money supply do not influence real variables Explain why changes in money growth affect the nominal interest rate but not the real interest rate 19 Explain why the value of GDP in 2012 would or would not change as a result of each transaction described below a In 2012 the Smith family purchases a new house that was built in 2012 b In 2012 the Jones family purchases a house that was built in 2001 c In 2012 a construction company purchases windows to put in the Smith family home that was built in 2012 d In 2012 Mr Jones paints all of the rooms of the Jones family house purchased in 2009 using paint and supplies purchased in 2012 e In 2012 Mr Smith uses an online brokerage service to purchases shares of stock in a construction company Page 4 20 Explain which expenditure category of GDP changes and the direction of the change that results for each transaction described a A domestic business purchases a domestically produced computer to use in a business office b A domestic business produces a computer that is sold to a foreign company c The federal government purchases a domestically produced computer to use in a courthouse d A domestic household purchases a domestically produced computer to use in a home e A domestic household purchases a computer produced in a foreign country to use in a home Page 5 Answer Key 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 B B D D A D B C A A D D B B B B a employed b out of the labor force c employed d out of the labor force e unemployed 18 According to the Fisher equation the nominal interest rate equals the real interest rate plus the expected rate of inflation The expected rate of inflation …