Principles of Macroeconomics (Econ 1) Signature:
Drake University, Fall 2004
William M. Boal Printed name:
MIDTERM EXAMINATION #3 VERSION A
“Long-Run Economic Growth and Inflation”
November 1, 2004
INSTRUCTIONS: This exam is closed-book, closed-notes. Simple calculators are permitted, but not graphing
calculators or calculators with alphabetical keyboards. Point values for each question are noted in brackets.
I. MULTIPLE CHOICE: Circle the one best answer to each question. [2 pts each—32 pts total]
(1) According to the aggregate production function,
potential GDP is determined by all of the following
except
a. total spending.
b. the size of the labor force.
c. the size of the capital stock.
d. technology.
(2) Suppose the capital stock at the beginning of
2004 is $8 trillion. Also suppose that during 2004,
gross investment is $1.5 trillion and depreciation is
$1.2 trillion. Then the capital stock at the beginning
of 2005 will be
a. $8 trillion.
b. $8.3 trillion.
c. $9.5 trillion.
d. $10.7 trillion.
(3) Investment spending is
a. positively related to the real interest rate.
b. negatively related to the real interest rate.
c. unrelated to the real interest rate.
d. cannot be determined from information given.
(4) If a person does not have a job, and last looked
for work two months ago, that person would be
classified by the Bureau of Labor Statistics as
a. employed.
b. unemployed.
c. out of the labor force.
d. cannot be determined from information given.
(5) "Job rationing" theories of unemployment
predict that unemployment could be reduced if
a. wages were increased.
b. wages were reduced.
c. workers were notified of plant closings in
advance.
d. government helped match unemployed workers
with employers.
(6) The last few decades have seen a decline in the
labor-force participation rate of
a. women only.
b. men only.
c. both women and men.
d. none of the above.
(7) Since 1700, long-run growth rates of real GDP
per capita in the fastest-growing countries have
a. remained about zero.
b. remained constant, though positive, from one
century to the next.
c. decreased from one century to the next.
d. increased from one century to the next.
(8) A country experiences faster "embodied"
technical change, the
a. more workers ("bodies") are available to use it.
b. faster the rate of investment spending.
c. more training workers receive.
d. larger the existing capital stock already in place.
(9) "Human capital" means
a. people-friendly businesses.
b. ergonomically designed equipment.
c. education and training.
d. retirement savings plans.
(10) A new idea for designing cars could potentially
be used by many car producers at once. Therefore,
this new idea is
a. a nonexcludable good.
b. a nonrival good.
c. a private good.
d. a transfer.
