Boğaziçi University Department of Economics Spring 2016 EC 102 PRINCIPLES of MACROECONOMICS Problem Set 4 Answer Key - PDF

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Boğziçi University Deprtment of Eonomis Spring 2016 EC 102 PRINCIPLES of MACROECONOMICS Prolem Set 4 Answer Key 1. Proutivity is the mount of goos n servies. n eonomy proues. It is not linke to ntion s

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Boğziçi University Deprtment of Eonomis Spring 2016 EC 102 PRINCIPLES of MACROECONOMICS Prolem Set 4 Answer Key 1. Proutivity is the mount of goos n servies. n eonomy proues. It is not linke to ntion s eonomi poliies.. n eonomy proues. It is linke to ntion s eonomi poliies.. proue for eh hour of worker s time. It is not linke to ntion s eonomi poliies.. proue for eh hour of worker s time. It is linke to ntion s eonomi poliies. 2. Whih of the following n e mesure y the level of rel GDP per person?. proutivity n the stnr of living. proutivity ut not the stnr of living. the stnr of living ut not proutivity. neither the stnr of living nor proutivity 3. Lst yer rel GDP per person in the imginry ntion of Olympus ws 4,250. The yer efore it ws 4,100. By out wht perentge i Olympin rel GDP per person grow uring the perio?. 1.6 perent. 2.5 perent. 3.7 perent. 6 perent 4. Lst yer the imginry ntion of Freeoni h popultion of 2,800 n rel GDP of 16,800,000. This yer it h popultion of 2,700 n rel GDP of 15,390,000. Aout wht ws the growth rte of rel GDP per person etween lst yer n this yer? perent. -5 perent. 5 perent. 5.3 perent 5. In 2011, the imginry ntion of Moni h popultion of 8,200 n rel GDP of 210,500. Moni h 5% growth in rel GDP per person. In 2012 it h popultion of 8,400. To the nerest ollr wht ws rel GDP in Moni in 2012?. 216, , ,416. None of the ove is orret. 6. In 2010, the imginry ntion of Bovin h popultion of 5,000 n rel GDP of 500,000. In 2011 it h popultion of 5,100 n rel GDP of 520,200. During 2011 rel GDP per person in Bovin grew y. 2 perent, whih is high ompre to verge U.S. growth over the lst one-hunre yers.. 2 perent, whih is out the sme s verge U.S. growth over the lst one-hunre yers.. 4 perent, whih is high ompre to verge U.S. growth over the lst one-hunre yers.. 4 perent, whih is out the sme s verge U.S. growth over the lst one-hunre yers. 7. In 2012, the imginry ntion of Pltln h popultion of 10,000 n rel GDP of 42,000,000. During the yer its rel GDP per person grew y out 1.94%. Whih of the following sets of growth rtes is onsistent with this growth in rel GDP per person?. 3% popultion growth n 4% rel GDP growth. 3% popultion growth n 5% rel GDP growth. 6% popultion growth n 4% rel GDP growth. 6% popultion growth n 5% rel GDP growth 8. For given yer, proutivity in prtiulr ountry is most losely mthe with tht ountry's. level of rel GDP over tht yer.. level of rel GDP ivie y hours worke over tht yer.. growth rte of rel GDP ivie y hours worke over tht yer.. growth rte of rel GDP per person over tht yer. 9. Over the lst ten yers proutivity grew more slowly in Ieri thn in Aire while the popultion n totl hours worke remine the sme in oth ountries. It follows tht. rel GDP per person must e lower in Ieri thn in Aire.. rel GDP per person grew more slowly in Ieri thn in Aire.. the stnr of living must e higher in Ieri thn in Aire.. All of the ove re orret. 10. Whih of the following n explin fster growth of rel GDP in ountry A thn in Country B?. oth greter popultion growth n greter proutivity growth in Country A. greter popultion growth in Country A, ut not greter proutivity growth in Country A. greter proutivity growth in Country A, ut not greter popultion growth in Country A. neither greter popultion growth nor greter proutivity growth in Country A 11. Miller s Diry proues 960 gllons of milk per y. Eh milker t the iry works 8 hours per y n proues the sme numer of gllons of milk per hour. If the Diry s proutivity is 12 gllons of milk per hour of lor, then how mny milkers oes the shop employ? Alexis n Tr oth mine slt. Alexis mines 300 pouns in 20 hours. Tr mines 400 pouns in 40 hours. Whih of the following is orret?. Alexis s proutivity is greter thn Tr s. This ifferene oul e expline y Alexis hving more physil pitl thn Tr.. Alexis s proutivity is greter thn Tr s. This ifferene nnot e expline y ifferene in the physil pitl eh hs.. Tr s proutivity is greter thn Alexis s. This ifferene oul e expline y Tr hving more physil pitl thn Alexis.. Tr s proutivity is greter thn Alexis s. This ifferene nnot e expline y ifferene in the physil pitl eh hs. 13. Dniel owns offee kiosk. All of his employees work 8 hours per y. In 2011, he employe 6 people who proue totl of 912 ups of offee eh y. In 2012, he hire seventh employee n proution inrese to 1008 ups of offee eh y. In Dniel s kiosk, proutivity. inrese y out 10.5 perent. inrese y 9.5 perent. erese y out 5.6 perent. erese y out 5.3 perent 14. In 2011, Moern Eletronis, In. proue 60,000 lultors, employing 80 workers, eh of whom worke 8 hours per y. In 2012, the sme firm proue 76,500 lultors, employing 85 workers, eh of whom worke 10 hours per y. Proutivity t Moern Eletronis. erese y 4%. remine onstnt.. inrese y 8.33%. inrese y 27.50% 15. Country A hs popultion of 1,000, of whom 800 work 8 hours y to mke 128,000 finl goos. Country B hs popultion of 2,000, of whom 1,800 work 6 hours y to mke 270,000 finl goos.. Country A hs higher proutivity n higher rel GDP per person thn ountry B.. Country A hs lower proutivity n lower rel GDP per person thn ountry B.. Country A hs higher proutivity, ut lower rel GDP per person thn ountry B.. Country B hs lower proutivity, ut higher rel GDP per person thn ountry B. 16. Country A h popultion of 2,000, of whom 1,300 worke n verge of 8 hours y n h proutivity of 5.Country B h popultion of 2,500, of whom 1,700 worke 8 hours y n h proutivity of 4. Country. A h the higher level of rel GDP n rel GDP per person.. A h the higher level of rel GDP n Country B h the higher level of rel GDP per person . B h the higher level of rel GDP n Country A h the higher level of rel GDP per person. B h the higher level of rel GDP n rel GDP per person. 17. Humn pitl is the. knowlege n skills tht workers quire through eution, trining, n experiene.. stok of equipment n strutures tht is use to proue goos n servies.. totl numer of hours worke in n eonomy.. sme thing s tehnologil knowlege. 18. Jnet is frmer. Whih of the following re inlue in her humn pitl?. her trtor n wht she s lerne from experiene. her trtor ut not wht she s lerne from experiene. wht she s lerne from experiene ut not her trtor. neither her trtor nor wht she s lerne from experiene 19. Whih of the following lists ontins, in this orer, nturl resoures, humn pitl, n physil pitl?. For resturnt: the ln the resturnt ws uilt on, the money it orrowe to uy supplies, the freezers where the hops n steks re kept.. For furniture ompny: woo, the skills n knowlege of its workers, sws.. For rilro: fuel, rilro engines, rilro trks.. None of the ove is orret. 20. Whih of the following sttements is orret?. Proutivity is eterminnt of humn pitl per worker.. Tehnologil knowlege is eterminnt of proutivity.. Humn pitl n tehnologil knowlege re the sme thing.. All of the ove re orret. 21. Suppose ountry reues restritions on how mny hours people n work. If reuing these restritions inrese the totl numer of hours worke in the eonomy, ut ll other ftors tht etermine output re hel fixe, then. proutivity n output oth rise.. proutivity rises n output flls.. proutivity flls n output rises.. proutivity n output fll. 22. An eonomy s proution funtion hs the onstnt returns to sle property. If the eonomy s lor fore oule n ll other inputs stye the sme, then rel GDP woul. sty the sme.. inrese y extly 50 perent. . inrese y extly 100 perent.. inrese, ut not neessrily y either 50 perent or 100 perent. 23. A ertin proution proess requires only two types of inputs pitl n lor. In 2006, 100 units of lor n 50 units of pitl were employe, n 100 units of output were proue. In 2013, 112 units of lor n 56 units of pitl were employe. If the proution proess isplys onstnt returns to sle, then how mny units of output were proue in 2013? An eonomy s proution form tkes the form Y = AF(L, K, H, N). If the proution funtion hs the onstnt-returns-to-sle property, then it is possile tht the speifi form of the proution funtion is. Y = 4L + 2K + 3H + N. Y = (L + K + H + N)/4. Y =. Y = 25. When workers hve reltively smll quntity of pitl to use in prouing goos n servies, giving them n itionl unit of pitl inreses their proutivity y reltively lrge mount. This sttement. is n ssertion tht proution funtions hve the property of onstnt returns to sle.. is onsistent with the view tht pitl is sujet to iminishing returns.. is inonsistent with the view tht it is esier for ountry to grow fst if it strts out reltively poor.. All of the ove re orret. 26. All else equl, if there re iminishing returns, then whih of the following is true if ountry inreses its pitl y one unit?. Output will rise y more thn it i when the previous unit ws e.. Output will rise ut y less thn it i when the previous unit ws e.. Output will fll y more thn it i when the previous unit ws e.. Output will fll ut y less then it i when the previous unit ws e. 27. Country A n ountry B oth inrese their pitl stok y one unit. Output in ountry A inreses y 12 while output in ountry B inreses y 15. Other things the sme, iminishing returns implies tht ountry A is. riher thn Country B. If Country A s nother unit of pitl, output will inrese y more thn 12 units.. riher thn Country B. If Country A s nother unit of pitl, output will inrese y less thn 12 units.. poorer thn Country B. If Country A s nother unit of pitl, output will inrese y more thn 12 units.. poorer thn Country B. If Country A s nother unit of pitl, output will inrese y less thn 12 units. 28. On proution funtion, s pitl per worker inreses, output per worker. inreses. This inrese is lrger t lrger vlues of pitl per worker.. inreses. This inrese is smller t lrger vlues of pitl per worker.. ereses. This erese is lrger t lrger vlue of pitl per worker.. ereses. This erese is smller t lrger vlue of pitl per worker. 29. Other things equl, reltively poor ountries ten to grow. slower thn reltively rih ountries; this is lle the poverty trp.. slower thn reltively rih ountries; this is lle the fll-ehin effet.. fster thn reltively rih ountries; this is lle the th-up effet.. fster thn reltively rih ountries; this is lle the onstnt-returns-to-sle effet. 30. The logi ehin the th-up effet is tht. workers in ountries with low inomes will work more hours thn workers in ountries with high inomes.. the pitl stok in rih ountries eteriortes t higher rte euse it lrey hs lot of pitl.. new pitl s more to proution in ountry tht oesn't hve muh pitl thn in ountry tht lrey hs muh pitl.. None of the ove is orret. 31. Whih of the following is onsistent with the th-up effet?. The Unite Sttes h higher growth rte efore 1900 thn fter.. After Worl Wr II the Unite Sttes h lower growth rtes thn wr-rvge Europen ountries.. Although the Unite Sttes hs reltively high level of output per person, its growth rte is rther moest ompre to some ountries.. All of the ove re orret. 32. Suppose U.S. utomker uils n opertes new ftory in Itly. Future proution from suh n investment will. inrese Itlin GDP more thn it inreses Itlin GNP.. inrese Itlin GNP more thn it inreses Itlin GDP.. hve no ffet on Itlin GNP, ut will inrese Itlin GDP.. hve no ffet on either Itlin GDP or GNP. 33. The opening of new Amerin-owne ftory in Algeri woul ten to inrese Algeri's GDP more thn it inreses Algeri's GNP euse. some of the inome from the ftory rues to people who o not live in Algeri.. gross omesti prout is inome erne within ountry y oth resients n nonresients, wheres gross ntionl prout is the inome erne y resients of ountry while prouing oth t home n ro.. ll of the inome from the ftory is inlue in Algeri's GDP.. All of the ove re orret. 34. Buskin s Corportion hs issue 2 million shres of stok. Its ernings were $10 million, of whih it retine 40 perent. Wht ws the ivien per shre?. $2.. $3.. $5.. $ A mutul fun. is finnil mrket where smll firms mutully gree to sell stoks n ons to rise funs.. is funs set sie y lol governments to len to smll firms who wnt to invest in projets tht re mutully enefiil to the firm n ommunity.. sells stoks n ons on ehlf of smll n less known firms who woul otherwise hve to py high interest to otin reit.. is n institution tht sells shres to the puli n uses the proees to uy seletion of vrious types of stoks, ons, or oth stoks n ons. 36. A on uyer is. sver. Long term ons hve less risk thn short term ons.. sver. Long term ons hve more risk thn short term ons.. orrower. Long term ons hve less risk thn short term ons.. orrower. Long term ons hve more risk thn short term ons. 37. In ntionl inome ounting, we use whih of the following pirs of terms interhngely?. investment n privte sving. investment n purhses of stoks n ons. sving n ntionl sving. puli sving n government tx revenue minus government spening 38. Suppose privte sving in lose eonomy is $12 n investment is $10.. Ntionl sving must equl $12.. Puli sving must equl $2.. The government uget surplus must equl $2.. The government uget efiit must equl $2. 39. For lose eonomy, GDP is $12 trillion, onsumption is $7 trillion, txes net of trnsfers re $3 trillion n the government runs efiit of $1 trillion. Wht re privte sving n ntionl sving?. $5 trillion n $3 trillion, respetively. $5 trillion n $1 trillion, respetively. $2 trillion n $3 trillion, respetively. $2 trillion n $1 trillion, respetively 40. For lose eonomy, GDP is $11 trillion, onsumption is $7 trillion, txes re $2.5 trillion n the government runs surplus of $1 trillion. Wht re privte sving n ntionl sving?. $1.5 trillion n $2.5 trillion, respetively. $2.5 trillion n $1.5 trillion, respetively. $2.5 trillion n $2.5 trillion, respetively. $1.5 trillion n $1.5 trillion, respetively 41. For n imginry lose eonomy, T = $5,000; S = $11,000; C = $48,000; n the government is running uget surplus of $1,000. Then. privte sving = $10,000 n GDP = $55,000.. privte sving = $10,000 n GDP = $63,000.. privte sving = $12,000 n GDP = $67,000.. privte sving = $12,000 n GDP = $69, Consier three ifferent lose eonomies with the following ntionl inome sttistis. Country A hs txes of $40 illion, trnsfers of $20 illion, n government expenitures on goos n servies of $30 illion. County B hs privte svings of $60 illion, n investment expenitures of $40 illion. Country C hs GDP of $300 illion, investment of $90, onsumption of $180 illion, txes of $60 illion n trnsfers of $20 illion. From this informtion, we know tht. ountry A hs the lrgest government uget efiit.. ountry B hs the lrgest government uget efiit.. ountry C hs the lrgest government uget efiit.. The government uget efiit is equl in ll three ountries. 43. In exmining the ntionl inome ounts of the lose eonomy of Nepotory you see tht this yer it h txes of $100 illion, trnsfers of $20 illion, n government purhses of goos n servies of $70 illion. You lso notie tht lst yer it h privte sving of $70 illion n investment of $50 illion. In whih yer i Nepotory hve uget efiit of $20 illion?. this yer n lst yer. this yer ut not lst yer . lst yer ut not this yer. neither this yer nor lst yer 44. The ountry of Yokovi oes not tre with ny other ountry. Its GDP is $20 illion. Its government ollets $2 illion in txes. Consumption equls $15 illion n investment equls $2 illion. Wht is puli sving in Yokovi, n wht is the vlue of the goos n servies purhse y the government of Yokovi?. -$2 illion n $1 illion.. $1 illion n $1 illion.. -$1 illion n $3 illion.. -$2 illion n $3 illion. 45. An inrese in the government s uget surplus mens. puli sving is greter thn $0 n inresing.. puli sving is greter thn $0 n eresing.. puli sving is less thn $0 n inresing.. puli sving is less thn $0 n eresing. 46. In lose eonomy, if Y remine the sme, ut G rose, T rose y the sme mount s G, n C fell ut y less thn the inrese in T, wht woul hppen to privte n ntionl sving?. ntionl sving woul fll n privte sving woul rise. ntionl sving woul rise n privte sving woul fll. oth ntionl sving n privte sving woul fll. None of the ove is orret. 47. The Eye of Horus inense ompny hs $10 million in sh whih it hs umulte from retine ernings. It ws plnning to use the money to uil new ftory. Reently, the rte of interest hs inrese. The inrese in the rte of interest shoul. not influene the eision to uil the ftory euse The Eye of Horus oesn't hve to orrow ny money.. not influene the eision to uil the ftory euse its stokholers re expeting new ftory.. mke it more likely tht The Eye of Horus will uil the ftory euse higher interest rte will mke the ftory more vlule.. mke it less likely tht The Eye of Horus will uil the ftory euse the opportunity ost of the $10 million is now higher. 48. Other things the sme, when the interest rte rises,. people woul wnt to len more, mking the supply of lonle funs inrese.. people woul wnt to len less, mking the supply of lonle funs erese.. people woul wnt to len more, mking the quntity of lonle funs supplie inrese.. people woul wnt to len less, mking the quntity of lonle funs supplie erese. 49. If there is shortge of lonle funs, then. the quntity of lonle funs emne is greter thn the quntity of lonle funs supplie n the interest rte is ove equilirium.. the quntity of lonle funs emne is greter thn the quntity of lonle funs supplie n the interest rte is elow equilirium.. the quntity of lonle funs supplie is greter thn the quntity of lonle funs emne n the interest rte is ove equilirium.. the quntity of lonle funs supplie is greter thn the quntity of lonle funs emne n the interest rte is elow equilirium. 50. Whih of the following woul neessrily inrese the equilirium interest rte?. The emn for n the supply of lonle funs shift right.. The emn for n the supply of lonle funs shift left.. The emn for lonle funs shifts right n the supply of lonle funs shifts left.. The emn for lonle funs shifts left n the supply of lonle funs shifts right. 51. Wht woul hppen in the mrket for lonle funs if the government were to erese the tx rte on interest inome?. There woul e n inrese in the mount of lonle funs orrowe.. There woul e reution in the mount of lonle funs orrowe.. There woul e no hnge in the mount of lonle funs orrowe.. The hnge in lonle funs is unertin. 52. Suppose the government were to reple the inome tx with onsumption tx so tht interest on svings ws not txe. The result woul e tht the interest rte. n investment oth woul inrese.. n investment oth woul erese.. woul inrese n investment woul erese.. woul erese n investment woul inrese. 53. In the lonle funs moel, n inrese in n investment tx reit woul rete. shortge t the former equilirium interest rte. This shortge woul le to rise in the interest rte.. shortge t the former equilirium interest rte. This shortge woul le to fll in the interest rte.. surplus t the former equilirium interest rte. This surplus woul le to rise in the interest rte.. surplus t the former equilirium interest rte. This surplus woul le to fll in the interest rte. 54. Suppose government expenitures on goos n servies inrese, trnsfers re unhnge, n txes rise y less thn the inrese in expenitures. These hnges in the government s uget use. oth the equilirium interest rte n the equilirium quntity of lonle funs to fll.. oth the equilirium interest rte n the equilirium quntity of lonle funs to rise.. the equilirium interest rte to rise n the equilirium quntity of lonle funs to fll. . the equilirium interest rte to fll n the equilirium quntity of lonle funs to rise. 55. Who in the ult popultion is ounte s employe in U.S. lor sttistis?. people who re temporrily sent from their jo n people who work without py in fmily memer s usiness. people who re temporrily sent from their jo ut not people who work without py in fmily memer s usiness. people who work without py in fmily memer s usiness ut not people who re temporrily sent from their jo. neither people who re temporrily sent from their jo nor people who work without py in fmily memer s usiness 56. Amy is working prt-time. Tvris is on temporry lyoff. Who is inlue in the Bureu of Lor Sttistis employe tegory?. only Amy. only Tvris. oth Amy n Tvris. neither Amy nor Tvris 57. Whih of the following inlues everyone in the ult popultion tht the Bureu of Lor Sttistis ounts s unemploye?. nyone who is not employe. n
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