Economics 1P92, Midterm #2 March 2014
Part A
Multiple Choice
1. Gross Domestic product is a dollar measure of
a. total investment in an economy
b. total industrial output in any given time period
c. the value of all final goods and services produced in one defined period of
time
d. the value of all tangible goods produced in a defined time period
2. “Stagflation” is a term designationg the co-existence of
a. increases in the general price level and high levels of unemployment
b. stagnation of output and disinflation
c. rapid economic growth and price increases
d. depression and recession
3. In terms of the normal aggregate supply-demand diagram, if aggregate
demand shifts to the right,
a. both prices and nominal GDP will rise
b. both prices and nominal GDP will fall
c. nominal GDP will rise and prices may either rise of fall
d. nominal GDP will fall and prices will rise
4. If the aggregate supply curve is very steep, then the primary impact of a
reduction in aggregate demand will be big
a. increase in the price level
b. decrease in the price level
c. decrease in the level of output
d. increase in the level of output
5. Inflation that is accurately predicted
a. redistributes income in a more arbitrary way than does inflation that is
unexpected
b. need not redistribute income between borrowers and lenders
c. cause the nominal rate of interest to be lower than the real rate of interest
d. encourages people to hold larger money balances
6. In a simple macro model with an open economy it is assumed that
a. exports and imports are autonomous
b. exports and imports are induced
c. exports are autonomous and imports are induced
d. exports are induced and imports are autonomous
7. The change in capital stock during a year is equal to:
a. gross investement
b. capital consumption allowance
c. net investement
d. net change in inventories plus capital consumption allowance
8. Disposable income:
a. includes capital consumption allowance
b. includes undistributed corporate profits
c. equals personal income minus personal income taxes plus transfer
payments and interest on public debt
d. equals to consumption expenditure plus savings
9. if desired aggregate expenditure is less than actual expenditure (as given by
the 45 line), then:
a. inventories begin to fall, causing firms to increase production
b. the level of national income must be below the equilibrium level
c. the level of national income must be above the equilibrium level
d. the level of national income must be at equilibrium
10. Which of the following does not constitute an increase in productivity?
a. Increased literacy among farmers made new information on farm
