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Econ 1120 - INTRODUCTORY MACROECONOMICSPRELIM #1 – Wissink – Fall 2016 – October 6________________________________________ ____________________________________Your LAST (FAMILY) NAME Your First (given) nameYour NetId:_________________ Your Student Number:________________________________Instructions and Exam Taking Policy:There are two sections in this exam. Answer all questions.Part I: 14 multiple choice/fill in the blank questions @ 3 points eachPart II: 3 problems @ 18, 20 and 20 points eachTotal Points = 100, Total Time = 90 minutes.NO QUESTIONS CAN BE ASKED DURING THE EXAM ABOUT EXAM CONTENT: If you need to use the restroom, or you need a pencil or scratch paper, or some other supply that we might have, raise your hand and wait for the proctor to come to you. Only one person can be out of the examination room at a time, and the proctor will hold onto your exam papers while you are out at the restroom.NO CELL PHONES, NO IPODS OR SIMILAR DEVICES WITH CALCULATOR “APPS”.NO GRAPHING CALCULATORS.NO BOOKS. NO NOTES. NO HELP SHEETS.NO TALKING TO EACH OTHER.Check the TA’s name for the section you regularly attend (that is, where you will pick up your prelim):One more time, please…_____________________________________ _________________________________Your LAST (FAMILY) NAME Your First (given) nameYour NetId:_________________ Your Student Number:________________________________GRADINGMC/FIB (out 42 points) =___________________Q1 (out of 18 points) =__________________Q2 (out of 20 points) =__________________Q3 (out of 20 points) =__________________TOTAL SCORE: =_____________________076200Part I: Multiple Choice and Fill-In-The-Blank Questions. Do them ALL.Circle the letter for your answer or fill in the answer in the blank provided.020000Part I: Multiple Choice and Fill-In-The-Blank Questions. Do them ALL.Circle the letter for your answer or fill in the answer in the blank provided.48456859842500. Consider the PPF for Ivyland. As resources in Ivyland are reallocated and the economy moves from point A to point Bthe marginal opportunity cost of widgets decreases.the total opportunity cost of widgets increases at a decreasing rate.the marginal opportunity cost of gadgets decreases.the economy becomes more efficient.None of the above are true.CiderDipOutput per hourAndy1 gal5 ozDwight60 gals120 ozJim40 gals10 ozKelly10 gals40 ozPam30 gals20 oz . Andy, Dwight, Jim, Kelly and Pam are asked by their boss Michael to make apple cider (measured in gallons) and cheese dip (measured in ounces) for the upcoming company party. The table shows output per hour for each employee. If the group assigns the tasks efficiently who would be the last person asked to start making dip?AndyDwightJimKellyPam. Many people love to eat hot dogs at baseball games. Which one of the following will increase demand for hot dogs at baseball games, assuming that hot dogs are a normal good?A decrease in billboards showing a popular local baseball player eating hot dogs.A drop in the price of pork used to make hotdogs.A fall in the price of beer, a popular complement with hot dogs.A fall in the price of hamburgers, a popular substitute for hot dogs.A decrease in income of the average baseball game attender.PriceQuantityDemandedQuantitySupplied$1,125 03,600$1,000 2402,940$875 5402,340$750 8401,800$625 1,2401,240$500 1,800840$375 2,340540$250 2,940240$125 3,6000. The table shows demand and supply information for the market for tablet computers. The government has impacted the market with a policy and consequently 540 tablets are traded. Which one of the following is correct?The government imposed a price floor of 1,240.The government imposed a price ceiling of $875.The government imposed a price floor of $875.The government imposed a quota of 2,340.The government imposed a floor of $375.. Many medical studies have suggested that a diet rich in whole wheat reduces the risk of heart disease. Recently, the National Institutes of Health endorsed these studies. At the same time, whole wheat bread producers face rising energy and wheat flour costs. Which one of the following predictions is correct?The equilibrium price of whole wheat bread will increase but the equilibrium quantity could go up or down.The equilibrium quantity of whole wheat bread will increase but the equilibrium price could go up or down.Both the equilibrium price and quantity will increase.Both the equilibrium price and quantity will decrease.Equilibrium price for whole wheat bread will not change.. Suppose that the demand function for jelly beans, a normal good, is typical and is written as follows: QD = 400 - 2F + 3J – 4G. Which one of the following statements is most likely to be true?Variable J could be the number of firms making jelly beans.Variable J could be the price of jelly beans.Variable J could be the price of an Easter basket to put the jelly beans in.Variable F could be the price of sugar used to make jelly beans.Variable G could be the price of jelly beans.. You run your own business as a dress maker and fashion designer. Which one of the following is an example of an intermediate good in the context of how the government calculates aggregate output with respect to your activities?The flour you buy for the preparation of your mother’s home-made birthday cake.The protein bar you bought and consumed for energy to stay awake during this exam.The fabric you buy for your company to make a dress your company sells to Princess Kate.The fabric you buy to make your own dress.The sewing machine you buy for your business.. HeavenLand is a country that is so nice that nearly all of its working citizens stay in the country and work in HeavenLand’s economy. In addition, since HeavenLand is so nice there are a huge number of foreign citizens working in HeavenLand. Which one of the following statements is most likely to be true?Heavenland's GNP will be greater than its GDP.Heavenland's GDP will be greater than its GNP.Heavenland's GNP and GDP will be equal.Heavenland's GDP will tend to be equal to its disposable national income.Heavenland's exports will equal its imports.. Which one of the following activities would not be included in any way in the value of U.S. GDP in 2016?General Motors building a factory in the U.S. in 2016.General Motors’ cars that were produced in Michigan in 2016 but were not sold until 2017.New student housing structures built in 2016 in Ithaca.The purchase of 60 shares of Apple stock by Adele via the New York Stock Exchange in 2016.Potatoes grown in the U.S. in 2016 and bought by McDonalds for making French Fries in its restaurants in 2016.. If real 2016 GDP in 2015 prices is LOWER than nominal 2016 GDP, thenprices in 2016 are generally lower than prices in the base year which is 2015.nominal 2016 GDP must equal nominal 2015 GDP.prices in 2016 are generally higher than prices in the base year which is 2015.real 2016 GDP in 2015 prices is larger than real 2015 GDP in 2015 prices.the implicit GDP deflator index in 2016 is less than 100.. Which one of the following individuals is considered unemployed by the U.S. Bureau of Labor Statistics?John, who works without pay for 30 hours per week in the family owned tax accounting business.Jill, who works 2 hours a week at Walmart as a greeter.Rose, who is currently a full time student at Cornell and working 60 hours a week on her studies to please her mom.Leyton, a former NFL football player just released from his contract who is now actively searching for some other job while taking a night class at TC3 (the local community college).A female with a Ph.D. in physics who decides to stay home and take care of her children after graduation.. Consider the following employment information.Labor force participation rate = 65%Total population 16 years of age and older = 210 millionUnemployment rate = 5%The total number of people unemployed is approximately7.58 million.9.54 million.6.83 million.4.67 million.136.5 million.. Fill in the blank – all or nothing question.Typical Urban Household’s BundleUnits in 2015Units in 2016Prices in 2015Prices in 2016Good A54$1.00$2.00Good B1012$2.00$1.50Good C2018$4.00$8.00Assume 2015 is the base year. The Consumer Price Index for 2016 based on the table’s data is____________________ . Fill in the blank – all or nothing question.Nominal GDP in the United States in 2015 was roughly$ ___________________________________1. Suppose the leather coat market in Ithaca in January is perfectly competitive and is characterized by the following demand and supply equations (Q = Quantity and P = Price):Demand for leather coats: QD = 1,500 - 3P and Supply of leather coats: QS = -100 + 1PDraw a carefully labeled diagram of the standard demand and supply curves in the leather coat market. Indicate numerical values at any endpoints (that is at intersections with the vertical and horizontal axes).Find the values for the market clearing equilibrium price P* and quantity Q*.Indicate these values on your graph from part (a).Suppose the mayor of Ithaca has the power to declare a price ceiling on this leather coat market.Why might the mayor want to do this?Suggest a plausible value for the price ceiling that will make it binding.Using your graph from part (a) and the equations above and YOUR suggested price ceiling, thoroughly analyze numerically and graphically the economic consequences of the price ceiling you have suggested.0457200Part II: Make sure you read and do ALL parts of each question. Show as much work as possible. TRY to get started on every question. Show us something. Write legibly and remember to label all graphs and axes in diagrams.020000Part II: Make sure you read and do ALL parts of each question. Show as much work as possible. TRY to get started on every question. Show us something. Write legibly and remember to label all graphs and axes in diagrams.ANSWERSANSWERS2. Sandy, Brian and Grant each work 40 hours a week. Sandy, Brian and Grant can do only two activities with their 40 hours of work each week: scrub floors and/or wash windows. Assume hours, floors and windows are infinitely divisible into fractional units. In a week of work Brian can wash 9 windows and scrub 0 floors, or scrub 3 floors and wash 0 windows, or any linear combination of these two extremes. Grant can wash 12 windows and scrub 0 floors, or scrub 12 floors and wash 0 windows, or any linear combination of these two extremes. Sandy is different. She can scrub 7 floors and wash 0 windows, or scrub 4 floors and wash 12 windows, or any linear combination between these two points. However, once she gets up to 12 windows she gets tired and from that point on, each additional washed window costs her 1/2 scrubbed floor.Using the graphs supplied, graph each individual’s production possibilities frontier. For full credit on graphs include numerical values at all end points and at any “kink” points.Just between Brian and Grant, who has the absolute advantage in each activity? Briefly defend your position.Just between Brian and Grant, who has the comparative advantage in each activity? Briefly defend your position and include complete information about marginal opportunity costs.The cleaning team of all three wants to determine the efficient joint production possibilities frontier. Using the graph supplied, determine the efficient joint production possibilities frontier. For full credit on graphs include numerical values at all end points and at any “kink” points.4366260274955Grant’s PPF020000Grant’s PPF1196340396875Brian’s PPF020000Brian’s PPF324612022872400left2286000024384064008000868680777240Sandy’s PPF020000Sandy’s PPF68580506730000716280472440Combined PPF using Sandy, Brian and Grant020000Combined PPF using Sandy, Brian and Grant3. Consider the simple closed economy of Downton with only four goods: radios, bread, apples and apple juice. There is no government, and no international sector and no investment by firms.Note the following very important information:Radios, bread and apple juice are all final goods and final goods only.Apples are both consumed by households as a final good AND used as an intermediate good by firms in the production of apple juice.It takes 2 pounds of apples to make each gallon of apple juice. This is true in both years.The apple juice industry buys all the apples it needs from the domestic apple industry. Remember it’s a closed economy.The table below provides ALL the information you need to know on prices and total output/production in two consecutive years: 2014 and 2015. (Plus some work space.)20142015WORK SPACE FOR YOU TO USE$Price per unitQuantity$Price per unitQuantityRadios$8.00100$9.0090Bread(loaves)$2.501000$2.401500Apples (pounds)$1.501000$2.001300Apple juice (gallons)$4.00200$5.00300Calculate nominal or current GDP in year 2014.Calculate nominal or current GDP in year 2015.Assuming 2014 is the base year, calculate both real GDP in 2014 and real GDP in 2015.Using percentage change, how much did the economy grow or shrink in real terms between 2014 and 2015? (Round to tenths) Briefly explain.Assuming 2014 is the base year, what is the implicit GDP deflator index in 2015? (Round to tenths)Using percentage change, was there inflation or deflation, and how much, between 2014 and 2015 according to the implicit GDP deflator index?Identify and briefly discuss two reasons why the way in which one calculates current or nominal GDP for this economy (or any economy, for that matter) might lead one to conclude that GDP is not really an accurate indicator of social welfare or standard of living in Downton.ANSWERS ................
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