Economics 101 - Cornell University



Econ 1120 - INTRODUCTORY MACROECONOMICSMakeup PRELIM #1 – Wissink – Spring 2019 – March 6________________________________________ ____________________________________Your LAST (FAMILY) NAME Your First (given) nameYour NetId: _____________________ Your Student Number: ________________________________Brief Survey on Studying (2 points): Your answers to these questions have absolutely no impact on your exam score, and I will remove all your names before I analyze this data.(1) We've had 11 classroom lectures so far this term. How many did you attend?(2) Not including attending lectures, how much time have you spent on this class each week doing things like reading or working on problem sets?less than one hour1-2 hours3-4 hours5-6 hours7+ hours(3) How much time did you spend studying for this prelim?less than one hour1-4 hours4-8 hours9+ hours(4) Did you mostly study for this prelim by yourself or with other students in the class?mostly by yourselfmostly with other students in the classabout half by yourself and half with other students in the class(5) When did you do most of your studying for this prelim?the night before and day of the examspread over multiple sessions over multiple days starting before the night before the exam(6) What did you do to study for this prelim? (Choose all that apply)Reviewed the lecture slides and/or your notes and/or Panopto videosRead the bookIdentified areas or topics you are struggling with and got help (e.g., used office hours, sections, the ETC, the LSC)Studied the MEL quizzes and other MEL contentWorked problems from the posted sample problem setsWorked problems from the posted sample prelimsExplained or taught the material to someone elseUsed outside web based tutorials of contentOne more time, please…Econ 1120 - INTRO MACRO – Makeup PRELIM #1 – Wissink – Spring 2019 – March 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: 13 multiple choice/fill in the blank questions @ 3 points eachPart II: 3 problems @ 15, 22 and 22 points respectivelyTotal Points = 98 + 2 points for doing survey = 100, Total Time = 90 minutes.NO QUESTIONS CAN BE ASKED DURING THE EXAM ABOUT EXAM CONTENT: If there is something troubling you about a question, write us a note on the exam somewhere and we will deal with it as we are grading. If 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. RESTROOM USE: If you absolutely need to use the restroom raise your hand and wait for the proctor. 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, IPODS OR DEVICES WITH CALCULATOR “APPS” or large screens.NO GRAPHING CALCULATORS. NO BOOKS. NO NOTES. NO HELP SHEETS.NO TALKING TO EACH OTHER.Check the section (i.e., DIS#) you regularly attend - that is where you will pick up your graded prelim-2216156413500Survey = ______________MC/FIB =___________________Q1 =__________________Q2 =__________________Q3 =__________________TOTAL SCORE: =____________left7620Part I: Multiple Choice and Fill-In-The-Blank Questions. Do them ALL.Circle the letter for your answer or fill in your 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 your answer in the blank provided.. Which one of the following is primarily a normative statement?Increasing the fines for fare evasion in public transportation will result in more ticket revenue.Creating large conservation regions can improve the chances of survival for endangered species.People often behave in ways that economists consider irrational.The size of commission fees in financial markets should be closely monitored so that rewards are equally shared.Several agents acting in their own selfish interest can sometimes lead to inefficient outcomes.. If an economy experiences unemployment, it would show up as a pointon the production possibilities curve, but on one of the axes.outside the production possibilities curve.inside the production possibilities curve.on the production possibilities curve.on a production possibilities curve which has shifted inward towards the origin.. A careless research assistant has presented his professor with the following unlabeled equation representing the market for Jeep Cherokees (a type of car): Q = 300 + 8F - 2J. The professor then spends numerous hours trying to figure out what the equation represents. Which one of the following is a plausible best guess?It is a supply function where F represents the price of Jeep Cherokees.It is a demand function where F represents the price of Jeep Cherokees.It is a supply function where F represents the cost of steel, a key input to jeep manufacturing.It is a demand function where J represents consumer income and Jeep Cherokees are normal goods.It is a demand function where J represents the price of a Chevrolet Traverse, a substitute for the Jeep Cherokee.. Migration is a politically sensitive topic. Much of the discussion is centered around the effect of migrants on labor markets. Suppose the government builds a wall and consequently decreases the number of migrants allowed into the country. Suppose also that the only exogenous effect this policy has is that it decreases the supply of labor in the economy. Which one of the following predictions is most correct based on a perfectly competitive model of demand and supply in the labor market?The equilibrium market price of labor (wages) will definitely increase and the equilibrium quantity traded (employment) could go up or down.Employment will definitely increase but wages could go up or down.Both wages and employment will definitely increase.Both wages and employment will definitely decrease.Wages will definitely increase and employment will definitely decrease.Price ($/pound)QuantityDemanded(pounds)QuantitySupplied(pounds)$2.005000$2.2545075$2.50400150$2.75350225$3.00300300$3.25250375$3.50200450$3.75150525$4.00100600. Consider the following supply and demand schedules in the local apple market. A new study shows that apple consumption improves health outcomes. The local government therefore wants to make apples more affordable and imposes a price ceiling of $2.50/pound on apples. Assume no black market activity.What is the quantity traded in the regulated equilibrium?Your answer: . Consider the apple market from the previous question. Suppose black market trading does take place. What is the black-market price predicted to be?Your answer: 2766060000. Consider the market for ground beef represented by the figure, which is initially in equilibrium at point J. Which one of the following is correct if the market equilibrium has shifted to point K?There is an excess supply of 50,000 pounds at the price of $1.00.The demand decreased due to a lower price substitute.There is an excess demand of 25,000 pounds at the price of $1.00.The shift in supply will cause a temporary shortage, which will disappear when the price rises to $1.50.Both demand and the quantity demanded have dropped.. Consider the national market for sugar. A report highlights the negative health impacts of consuming sugar. At the same time there is a terrible drought in the southern states that farm sugar. Which one of the following statements is correct concerning the sugar market?Equilibrium price and equilibrium quantity must increase as a consequence of these events.Equilibrium price and equilibrium quantity must decrease as a consequence of these events.Equilibrium price will increase and equilibrium quantity will decrease as a consequence of these events.Equilibrium price will definitely increase but we don’t know what will happen to equilibrium quantity as a consequence of these events.Equilibrium quantity will definitely decrease but we don’t know what will happen to equilibrium price as a consequence of these events.. Which one of the following is an example of a final good or service in relationship to this year’s U.S. GDP? All production and transactions took place this year, unless otherwise noted. GDP=Gross Domestic Product.Corn produced last year in Cortland and sold this year at Wegmans.Lumber made in Vermont and purchased by WeMakeChairs of New Jersey to make chairs.Children’s toys made in China that you bought at Walmart.The used economics textbook (published and printed 3 years ago) which you bought on E-Bay this year.The Corning pottery made in Corning, NY this year that was added to the inventory of a department store in Japan in anticipation of rising sales in Japan next year.. A country's GNP will definitely exceed its GDP if ________ foreign companies produce in the country and ________ of the country's companies produce abroad. no; manymany; nonemany; manyno; nonenothing but; none. The implicit GDP deflator index uses base year (or historical) __________________ to measure inflation whereas the CPI uses base year (or historical) ____________________ to measure inflation.A. prices, quantitiesB. quantities, pricesC. prices, interest ratesD. interest rates, debt ratiosE. debt ratios, prices.. Which one of the following statements is false?One problem with any fixed-bundle index like the CPI as a measure of the cost of living is that it does not account for substitutions that consumers might make in response to price changes.The implicit GDP deflator index is a very broad measure of inflation.The consumer price index would not reflect increases in the prices of items the U.S. military purchases.The consumer price index somewhat understates increases in the cost of living during periods of inflation.The consumer price index reflects, to some degree, increases in the price of higher education.center2286000TABLE A. Refer to Table A. Assume that year 1 is the base year and that the bundle in year 1 is what is used as the typical urban consumer’s bundle.Based only on this information, calculate the CPI for year 3.Your answer: ____________________________0845185Part 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.1. In a small country named Smokefree, cigarettes are officially forbidden, but the people trade cigarette anyway “under the table” as they say. Cigarette demand (in packs) is QD = 12 ? P and cigarette supply (in packs) is QS = 2P.Graph the demand and supply. Please make your graph big enough to answer this entire question.Find the values for the equilibrium price and quantity in the market and show on your graph.The government becomes aware of these trades and deploys its police force in a way which will result in it seizing and destroying half of the quantity of cigarettes supplied at each and every price. Under this circumstance, what are the resulting demand and supply functions? What is the new equilibrium price and quantity? Show the result of this policy on your demand and supply diagram.Suppose that instead of the “seize and destroy” policy, the government decides to allow trade based on the original demand and supply curves and then to also use a price floor to limit trade to the same number of packs as under the “seize and destroy” policy. What would the value of the price floor need to be? Show on your graph and briefly discuss the consequences of the price floor policy.Answers:Answers:2. Assume that Countries A and B have equal quantities of labor resources and identical technologies. Country A can produce 100 bushels of wheat or 100 yards of cloth, or any combination as shown by the linear PPF “XZ” in the figure below. Country B can produce 100 bushels of wheat or 300 yards of cloth or any combination, as shown by the linear PPF “XY” in the figure below.Which country has an absolute advantage in the production of wheat, and which country has an absolute advantage in the production of cloth? Briefly defend your answers.Which country has a comparative advantage in the production of wheat and which has a comparative advantage in the production of cloth? Briefly defend your answers.Construct the joint production possibilities frontier for these two countries. Make sure to: label the axes with units of measurement and values, identify values at any kink points, and indicate the steepness of the joint PPF.Assume that the two countries completely specialize in the good they have the comparative advantage in and that both countries consume both goods after trade takes place. Which country imports wheat?Assume the terms of trade are that one bushel of wheat exchanges for two yards of cloth. Explain why the country that imports wheat will gain from trade.Answers:Answers:3. Consider a very simple economy named Vinopolis with only three items: tutoring, grapes and wine. There is no government, and no international sector and no investment by firms. Note the following:Tutoring and wine are both final goods and final goods only.Grapes are both consumed by households as a final good and used as an intermediate good by firms in the production of wine.It takes 3 pounds of grapes to make 1 bottle of wine. The wine industry buys all its grapes from the domestic grape industry.The money is called the dollar and it’s symbol is $.The table below provides ALL the information you need to know on prices and total output/production in two consecutive years: 2017 and 2018.Year = 2017Year = 2018ItemPrice per unitQuantityPrice per unitQuantityTutoring(hours)$5050$8040Grapes (pounds)$41100$51500Wine(bottles)$16200$30300Calculate nominal/current GDP in both years.What is real GDP in 2018 assuming 2017 is the base year?How much did the economy grow or shrink between 2017 and 2018? Defend your answer with careful calculations.What is the implicit GDP deflator index in 2018, assuming 2017 is the base year and is standardized to an index of 100?Calculate how much inflation there was between 2017 and 2018 according to the implicit GDP deflator index, using 2017 as the base year.The rest of the questions for this problem can be answered with no reference back to the numbers given.Briefly but concisely identify two important ways in which the Consumer Price Index (CPI) differs from the implicit GDP deflator index.Identify and briefly discuss two reasons why the way in which we calculate nominal GDP might misrepresent its true value as an indicator of social welfare.Answers:Answers:Answers: Makeup Prelim 1, econ 1120, Spring 2019 ................
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