UNI VERS I TY OF TORONTO

Faculty of Arts and Science

T E S T August 6, 2014
E C O lOOYl Y L5101
Duration: 1 Hour
Examination Aids allowed: Non-programmable calculators only
THI S E X AM CONSI STS OF 25 MU LT I P LE C HOI C E QUESTI ONS
INSTRUCTIONS:
Answer the Multiple Choice questions on the separate b u b b l e f or m supplied. Each
question is worth 1mark. No d ed u c t i on s wi l l be mad e f or i n c or r ec t a n s w e r s .
Using an HB or " s of t " p en c i l onl y , make dark solid marks that fill the bubble
completely. Erase completely any marks you want to change. Crossing out a marked
box is not acceptable and is incorrect. If more than one answer is selected then that
question earns 0 points.
ON THE BA C K OF THE FOR M: Print your L A S T NA ME and I NI TI A L in the boxes
A ND darken each letter in the corresponding bracket below each box.
ON THE FRONT OF THE FOR M: Print your 9 (or 10) digit S TU DENT NUMBER in
the boxes A ND darken each number in the corresponding bracket below each box.
Your FORM C OD E is A . Write in the other requested information in the upper right
region of the form.
NAME:
(Last Name) Print Clearly (First Name)
STUDENT NUMBER:
NOTE: USE T HE BAC K OF ANY P AGE FOR ROUGH WORK
There are 5 pages to this exam
-1/5-
ECOIOOY L5101: Midterm #2, August 6, 2014
Part I : Place your answers (and work where necessary) in the space provided.
1. Which of thefol l owing is true for the U.S. labour force data for J uly, 2014?
A ) The unemployment ratefell slightly to 6% and employment roseby less than 200,000
B) The unemployment ratefell slightly to 6% and employment roseby more than 200,000
C) The unemployment rate roseslightly to 6.2% and employment roseby less than 200,000
^iThe unemployment rate roseslightly to 6.2% and employment roseby more than 200,000
A ) None of the above
2. A n economy's Adul t Population is 28 mi l l i on, Employment is 15 mi l l i on. Part-time
Employment is 3 mi l l i on. Unemployment is 2mi l l i on, and Discouraged Workers are 1
mil l ion. What is the Labour Force Participation Rate(LFPR) and the Unemployment Rate
(A) LFPR =60.1% and UR =11.8% B) LFPR =64.3% and UR =11.1 %
C) LFPR =71.4% and UR = D) LFPR =75% and UR =14.3%
E) Noneof the above
Questions 3 to 5 refer to thefol l owing data per month for the averagefamily's consumption
of Rice and Chicken i n June, 2004, and June, 2014. 2004 is the base year.
June, 2004 June, 2014
Price/unit Quantity Price/unit Quantity
Beef (100 grams) $2.50 15 $4 8
Yoghurt (100 grams) $3 5 $2 10
What was the Consimier Price Index (CPI) i n June, 2014 (to the nearest decimal)?
A ) 96 B)104 C) 123.5 (^133.3 E) None of the above
What was Real Expenditure i n June, 2014, according to the CPI (to the nearest cent)?
@$39 B)$50 C)$52 D) $52.5 E) None of the above
What was the GDRDeflator i n June, 2014 (to the nearest decimal)?
A ) 96 / B ) l t) 4 C) 123.5 D) 133.3 None of the above
Supposethat the baseyear of a country's price indices is 2000. Whi ch of thefol l owing wi l l
ncreasethe GDP Deflator but not changethe CPI i n 2010?
A ) A n increasei n the priceof California grapes
A n increasei n the price of Ontario apples
( ^A n increasei n the priceof Ipads, whi ch were introduced i n 2006
D) A n increasei n the price of Blackberries^which were introdnCediirt998
(E) None of the above
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ECOIOOY L5101: Midterm #2, August 6,2014
Questions 7 and 8 concern thefol l owing information, all on a "domestic" basis, defining
Canada's accounts in 2000 (SMillions).
Net Income of Unincorporated Businesses (Farm and non-Farm) and Rent- - - -62,000
Wages and Salaries and Supplementary Labour Income -~ 520,000
Depreciation (Capital Consumption Allowances) - 105,000
Exports - 465,000
Corporate Profits (before Taxes) ~~ - . ^^^
Consumption - ^ -,.,>.-^,,, . ^. , ^^, -v. 569,000
Interest and Miscellaneous Investment Income - , 64,000
Investment . , . " * - ~ ~ - V . ^ . - M . - - , , ^ ^ 196,000
Government Spending . - . ^ . - . - - ^ ^ ^ - - - . , , 220,000
Government Transfer Payments . . , . 6 2 , 0 0 0
Savings- . . . . . . ^ . - ^ K ^ * . 95,000
Imports ,..,,.^.>.,.^>.....^>,.^^ 430,000
Corporate Taxes ,,~..,~^r-~.t~--'-'~-^.''^-.~^^ rni i i "i i j MH ] Ti i r- - 1 ^,000
Personal Taxes. ' - ' ^' - ' ' ^- ' - ' ^ .145,000
Indirect Taxes Less Subsidies,
7. What was Net Domestic Income in 2000?
0 787,000 B) .802,000 C) 849,000
8. What was Gross Domestic Product in 2000?
/''"'>-^875,000 B) 892,000 C) 915,000 ( 1,020,000 E) None of the above
9. Suppose that Canada GoosFbuyr$2 mil l ion in down produced this year in Manitoba and $3
mil l ion in cloth produced last year in Montreal to make $8 mil l ion worth of winter jackets in
Toronto this year. They sell $9 mil l ion worth of jackets this year. What is total contribution
to Canadian GDP this year by all this activity? ^
A) $5 mil l ion B) $6 mil l ion $8 mil l ion D) $9 mil l ion E) None of the above
Which one of thefol l owing is False for the Keynesian Consumption function?
^Average Consumption is constant with increases in Disposable Income
T) Savings is the residual of Disposable Income and Consumptio
- C) Autonomous Consumption and the Marginal Propensity to Consume (MPC) are constant
D) The Marginal Propensity to Save (MPC) is 1 minus the MPC (MPS =1-MPC)
E) Consumption is a function of Disposable I nco
11. Thefollowing equations describe Aggregate Expenditure for an economy,
C =250 +0.9Yd T =0.2Y I =50 +0.2Y
G = 800 / X =1000 I M =100 +0.17Y
What is equilibrium Y?
8,000 B) 8,500 C) 8,800 D) 9,600 E) None of the above
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ECOIOOY L5101: Midterm #2, August 6,201
Questions 12 to 15 refer to thefol l owing equations for the Aggregate
Consumption (C), Government Spending (G) and Net Taxes (T) functions of an economy.
AE =5,300 +0.6Y C =1,500 +0^75^' G =2,200 T =20 +0.2Y
12. What is the Government Budget Surplus (+)/Deficit (-) at equilibrium?
A) 430 B)450 (0470 D) 520 E) None of the above
What is the change i n the Government Budget Surplus (+)/Deficit(-) given an increase in
"^Government Spending of 10 (AG =+10)?
A)-10 / ^5 C)0 @)+5 E)+10
14. What is the change i n Govenmient Spending necessary to increase equil ibrium Income by
20?
A) 20 B)15 C)12.8 " E) 5
./ What is the change in Transfer Payments necessary to increasegquilibriumIncome by 15?
A) 3 B)3.75 (C)6 D) 7.5 (E^8
16. Suppose that a bank loans al l excess reserves and the target (required) reserve ratio is 12.5
(0.125). Which of thefol l owing is true in equiHbriumi f the bank initial l y has $400 mil l ion
in reserves and $3,600 mil l ion in deposits?
^Deposi ts are $3,200 mil l ion and Loans are $2,800 mil l ion
B) Deposits are $3,600 mil l ion and Loans are $3,200 mil l ion
C) Reserves are $400 mil l ion and Loans are $3,200 mil l ion
C) Reserves are $450 mil l ion and Deposits are $3^00 mil l ion
E) None of the above
17. Suppose that the Bank of Canada issue of legal tender (currency) i
circulation is $23 bil l ion, and the target (reserve) reserve ratio is 8%) (0.08). Which of the
fol l owing is true at equilibrium?
A) Reserves are $3.2 bil l ion and Loans are $16.8 bil l ion
B) Deposits are $212.5 bil l ion and Loans are $189.5 bil l ion
C) Reserves are $17 bil l ion and Money Supply is $212.5 bil l ion
D) Reserves are $17 bil l ion and Loans are $189.5 bil l ion
<^Loans are $195.5 and Money Supply is $235.5 bil l ion
18. Suppose that the target (required) reserve ratio is 12.5%. What is the
reserves and money supply i f the Bank of Canada sells $100 mil l ion in bonds?
@ Change in Reserves =-$100 mil l ion and Change in Money Supply =-$800 mil l ion
B) Change in Reserves =-$100 mil l ion and Change in Money Supply =-$1,250 mil l ion
C) Change in Reserves =+$100 mil l ion and Change in Money Supply =+$800 minion
D) Change in Reserves =+$100 mil l ion and Change in Money Supply =+$1,250 mil l ion
E) None of the above
ECOIOOY L5101: Midterm #2, August 6,2014
19. The Federal Government finances the purchase of $1 billion in new heli
borrowing $800 million fromthe general public and $120 million fromthe chartered
(private) banks and withdraws $50 million in deposits fromthe Bank of Montreal and $30
million in deposits fromthe Bank of Canada. What is theequilibriumchange in reserves?
A)-$80 million B)-$30 million C) j ; |i P million D) $+80 million E) $180 million
Questions 20 to 21 concern thefollowing equations for Money Demand (M), Investment
(I), and Aggregate Expenditure. The interest rate is r and Y is Income. h - l'^ i tY" ^^'C
M =0.15Y-800r I =30-600r AE =148 +I +0.8
20 What is theequilibriuminterest ratei f Money Supply is 96 and Y is 800?
A) r =0.02 and I =18 ^ r =0.03 and I =12 C) r =0.35 and I =
D)r =0.04andl =6 E) None of the above
21. What is 'equilibrixmi" Y Ognore 'crowding out') i f the money supply decreases
A) 780 ig))792.5 C) 800 D) 812.5 E) 825
Questions 22 to 24 concern an economy's Aggregate Expenditure and Short-run Aggregate
Supply (SRAS) fionctions below. The economy is initially in long-run equilibrium.
AE =2400 +0.7Y-3P SRAS =6,000 +15
22. What is equilibriumPrice (P) and Y (Income)?
A) P=155 and Y =6,450 B) P =120 and Y =6,800
P= 80 and Y =7,200 E) None of the above
What is short-run equilibriumPrice and Income given an increase in Governmen
S,of6(AG =6)?
A)P =78andY =7,100 B) P = 80.24 & Y =7,203.6'CiP = 80.8 and Y =7,212
D)P= 90.8 and Y =7,112 (E)jNone of the above \ ,
Wat is thelong-run equilibrium Pricegiven an increase in Government Spending of 6 (AG
6)?
.) P =80.6 , B) 82 C) 85 D) 90 None of the above
IS. Suppose that an economy is initially at long-run equilibrium. What is theequilibriumeffect
qf an increase in Government Spending in the short-run?
A^An increase in Income and Prices but no change in the real interest rate
^ An increase in Income and Prices and an increase in the real interest rate
C) An increase in Income and the real interest rate but no change in Prices
D) No change in Income, Prices, or the real interest rate
<^None of the above