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HOMEWORK #2--MACROECONOMIC PRINCIPLES

ECN 211, SECTION 1004, LEC 71306--FALL SEMESTER, 2012

Dr. Filer

Due: At the end of class, Monday, October 22, 2012.

Multiple Choice: Answer each of these questions by darkening the bubble on your scantron sheet, as if you

were taking an exam in class. Hand in only the scantron sheet. Make sure you have darkened in your name and10-digit ASU Affiliate ID number on the scantron sheet. YOU MUST USE THE (8 1/2 INCH BY 11 INCH)

SCANTRON FORM 229633 BYEXAM SYSTEM II,AVAILABLE IN THE ASU BOOKSTORE. NO OTHER

TYPE OF SCANTRON FORM WILL BE ACCEPTABLE.

Use the following to answer questions 1-4:

Production Data

Prices per Unit Quantity

Production 1995 2003 1995 2003

ComputersCalculators

$2,000$60

$1,600$70

100900

1301100

1. Refer to the table above. What is the constant-dollar real GDP growth from 1995 to 2003 using

1995 as the base year?

A) 27.8 percent.

B) 28.3 percent.

C) 0 (zero).

D) 75 percent.

E) 18.3 percent.

2. Refer to the table above. What is nominal GDP for 1995?

A) $520,000.

B) $448,000.

C) $110,000.

D) $254,000.

E) $223,000.

3. Refer to the table above. What is the constant-dollar real GDP growth from 1995 to 2003 using

2003 as the base year?A) 28.3 percent.

B) 27.8 percent.

C) 75 percent.

D) 0 (zero).

E) 18.3 percent.

4. Refer to the table above. What is the nominal GDP for 2003?

A) $254,000.

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B) $520,000.

C) $285,000.

D) $223,000.

E) $376,000.


Price Data

1999 2003

1 Pair of Jeans

1 Pair of Shoes

$29

45

$35

49

5. In the table above, what was the approximate inflation rate between 1999 and 2003?

A) 17.4 percent.

B) 83 percent.

C) 8 percent.D) 13.5 percent.

E) 66 percent.

6. Which of the following is true with respect to the table above?

A) The absolute price of shoes declined from 1999 to 2003.

B) The relative price of shoes in terms of jeans was 2/3 in 1999.

C) The relative price of shoes in terms of jeans was 1.68 in 1999.

D) The relative price of jeans fell between 1999 and 2003.

E) The relative price of shoes fell from 1999 to 2003.


Disposable Income (Yd) Consumption (C)

$0 million $10 million








Yd = C+S

S = Yd - C

7. Refer to the table above. The savings function is equal to

A) S= 50 + 0.1Yd.

B) S= -10 + 0.1Yd.

C) S= 10 + 0.1Yd.

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D) S= 0.9Yd.

E) S= 325 + Yd.

8. Refer to the table above. TheMPCis equal to

A) 0.90.

B) 0.09.

C) 1.00.D) 0.01.

E) 0.10.

9. When we consider an upward-sloping aggregate supply curve and a downward-sloping

aggregate demand curve, an increase in aggregate expenditures at all price levels is reflected as

A) a leftward shift in theAD curve, which increases the equilibrium price level and decreases

equilibrium real GDP.

B) a leftward shift in theAS curve, which increases the equilibrium price level and decreases


C) a rightward shift in theAS curve, which increases both the equilibrium price level andequilibrium real GDP.

D) a rightward shift in theAD curve, which increases both the equilibrium price level and


E) a leftward shift in theAD curve, which decreases both the equilibrium price level and real

GDP.

10. Assume that at the current market price of $4 per unit of a good, you are willing and able to buy

20 units. Last year at a price of $4 per unit, you would have purchased 30 units. What is most

likely to have happened over the last year?

A) Supply has increased.

B) Supply has decreased.C) Demand has decreased.

D) Quantity supplied has decreased.

E) Demand has increased.

11. According to the law of demand, if the price of movie rentals decreased, ceteris paribus,

A) the quantity demanded of movie rentals would decrease.

B) the quantity demanded of movie rentals would not change.

C) the demand for movie rentals would increase.

D) the quantity demanded of movie rentals would increase.

E) the demand for movie rentals would decrease.

12. Since 1920, the NBER (National Bureau of Economic Research) has tracked the business cycles

in the U.S. economy that occurred between 1854 and the present time. Approximately how

many (complete) business cycles occurred in the U.S. during the period 1854-2012?

A) 32.

B) More than 50.

C) 12.

D) 33.

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E) 43.


Production Data

Prices per Unit Output

Production 1995 2003 1995 2003

Vegetables

Meat

$2

$8

$4

$12

250

500

400

650


A) $500.

B) $4,500.

C) $750.

D) $5,400.

E) $10.

14. Refer to the table above. What is the real GDP growth from 1995 to 2003 using 1995 as the base

year?

A) 34.3 percent.

B) 73.3 percent.

C) 11.1 percent.

D) 13.6 percent.

E) 33.3 percent.

15. Refer to the table above. What is the real GDP growth from 1995 to 2003 using 2003 as the base

year?

A) 34.3 percent.

B) 11.0 percent.

C) 11.4 percent.

D) 13.6 percent.

E) 33.3 percent.


A) $4,500.

B) $750.C) $9,400.

D) $1600.

E) $7,800.

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17. In a capitalistic, free-market system, who decides what is produced?

A) Financial Intermediaries, such as Goldman-Sachs and Morgan-Stanley.

B) The Federal Government.

C) Corporations.

D) State and Local Government Authorities.

E) Consumers.

Use the following to answer question 18:

AD2

AS

Y1 Y2 Y3

Real GDP (dol lars)

P3

P2

P1P

rice

Level

dollars

AD1 AD3

B

C

A

Assum e the d is tancebe tween AD1 and AD2 isequal to the d is tancebe tween AD2 and AD3 .

18. Refer to the figure above. What would cause the economy to move from equilibrium point A to equilibrium

point B?

A) Lower national income levels in Germany, Canada, and Mexico.

B) A significant decline in the U.S. common equity market (a "stock-market crash").

C) Lower Federal tax rates on individuals and businesses in the U.S.

D) A significant technological improvement in the electricity-generation industry.

E) None of the above would cause the economy to move from point A to point B.

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For questions 19 through 23 below, assume the following annual values for each of the macroeconomic variable

given. Numbers are $ billions per year.

Ig = Gross Investment = 250

RE = Retained Earnings of Corporations = 20

G = Government Goods = 500BusTr = Net Business Transfer Payments = 22

M = Imports = 300

RFRW = Receipts From the Rest of the World = 30

PayTax = Payroll Taxes = 60

SSI = Social Security Income = 35

CCA = Capital Consumption Allowance (Depreciation) = 145

C = Consumer Goods = 2,200

IBT = Indirect Business Taxes = 30

PTRW = Payments To the Rest of the World = 20

CIT = Corporate Income Taxes = 40

X = Exports = 200S.D. = Statistical Discrepancy = 30

19. How much is Gross Domestic Product (GDP) for the economy? GDP = 500+(200-300)+2,200 +250

A) 2,650.

B) 2,850.

C) 2,800.

D) 2,600.

E) 2,050.

20. How much is Gross National Product (GNP) for the economy? GNP = GDP + RFRW PTRW

2850 +30 - 20A) 2,654.

B) 2,860.

C) 2,604.

D) 2,840.

E) 2,616.

21. How much is Net National Product (NNP) for the economy?

A) 2,715.

B) 2,559. 2860 - 145

C) 2,574.D) 2,769.

E) 2,571.

22. How much is National Income (NI) for the economy?

A) 2,685.

B) 2,739.

C) 2,544.

D) 2,729.

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E) 2,529.

23. How much is Personal Income (PI) for the economy?

A) 2,447.

B) 2,476. PI = 2685 + -93

C) 2,403.

D) 2,676.

E) 2,592.

Use the following table to answer questions 24 and 25.

PRICE INDEX

YEAR NOMINAL FOR GDP

GDP (2000 = 100)1970 $1,500 B 25

1977 $3,000 B 50

24. What is real GDP in 1977 using 2000 as the base year?

A) 6,000.

B) 4,000.

C) 100.

D) 5,000.

E) 10,000.

25. By how much did real GDP increase between 1970 and 1977?

A) 1,000.

B) 2,000.

C) zero.

D) 4,000.

E) 5,000.

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