Midterm Exam 2021-2022

Date: Tuesday, November, 22/2022.

Course Title: Introduction to Macroeconomics (BCOR 240)
Duration: 9:00 AM – 10:30 AM (1h30 hours)
Groups: All groups.
Number of pages: 7

INSTRUCTIONS

1. Cell phones, books and notes are strictly not permitted.

2. Only non-scientific (no memory) calculators are permitted.

3. Concerning the MCQ, choose one answer; choosing more than one
answer is graded zero.

4. 30 questions

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Groupe:--------------------------------
Questions from 1 to 4 are related. Question 4

Question 1 To maintain the same quantity of money

in the economy, the Fed
You are given this account for a bank
a- chooses to apply discount rate
Assets Liabilities b- choose to control currency-deposit
$1,200 (reserves) $8,000 (deposits) ratio
$6,800 (Loans) c- choose to apply the Term Auction
Facility
The required minimum reserve ratio is d- choose to apply interest on banks’
10%. reserves

Fed imposed a required minimum

reserve to Banks Questions from 5 to 6 are related.

a- to increase their profit Question 5

b- to decrease their lost coming from
loans Bank-1 has $250 assets, $180
c- to increase their loans and then liabilities and $70 capital. Bank-
increase money supply 2 has $250 assets, $190
d- to ensure enough money in banks for liabilities and $60 capital. Bank-
depositors who may need to withdraw 3 has $250 assets, $210
cash liabilities and $40 capital. Bank-
4 has $250 assets, $220
liabilities and $30 capital.
Question 2
We suppose that some
How much are its excess reserves? borrowers cannot repay their
loans. We suppose the value of
a- 0.02 assets decrease by 25%. Which
b- 0.03 Bank is said to be insolvent (or
c- 0.04 vulnerable).
d- 0.05
a- Bk1 , Bk2 , Bk4
b- Bk1 , Bk3 , Bk4
Question 3 c- Bk2 , Bk3 , Bk4
d- Bk1 , Bk2 , Bk3
If the bank want to use excess reserves
by how much can the bank increase its
loans?

a- by $300
b- by $400
c- by $500
d- by $600
 a- Pvs ($1400) ;Pbs ($180) ; Ns ($1580)
b- Pvs ($1300) ;Pbs ($300) ; Ns ($1600)
c- Pvs ($1400) ;Pbs ($200) ; Ns ($1600)
d- Pvs ($1500) ;Pbs ($200) ; Ns ($1700)
Question 6 Question 9

Bk1 has $20 as capital requirements ; Compute the interest rate of equilibrium
Bk2 has $10 as capital requirements ; (denoted by case A).
Bk3 has $22 as capital requirements ;
Bk4 has $34 as capital requirements ; a- 1.5
b- 2
Which Banks are not considered c- 2.5
insolvent (or vulnerable). d- 3

a- Bk1 , Bk2 , Bk4

b- Bk1 , Bk3 , Bk4 Now suppose that T rises to $3500.
c- Bk2 , Bk3 , Bk4
d- Bk1 , Bk2 , Bk3 Question 10

Compute the private saving; the public

Question 7 saving and the national saving

To increase investment and reduce real a- Pvs ($1050) ;Pbs ($700) ; Ns ($1750)
interest rate, the government chooses to b- Pvs ($1150) ;Pbs ($700) ; Ns ($1850)
c- Pvs ($1200) ;Pbs ($600) ; Ns ($1800)
a- reduce Taxes d- Pvs ($1150) ;Pbs ($500) ; Ns ($1650)
b- increase Taxes
c- increase the budget
d- print more money Question 11

Compute the interest rate of equilibrium

Questions from 08 to 12 are related. (denoted by case B).

Question 8
a- ≈1.04
Consider an economy described by the b- ≈0.94
following equations: c- ≈0.84
Y = C + I + G, d- ≈0.74
Y = 6,000 ; G = 2,800 ; T = 3,000,
C = 100 + 0.5(Y − T ),
I = 2,000 − 160r. Question 12

Compute the private saving (Pvs); the Between the two cases (A and B) which
public saving (Pbs) and the national one is better for the economy-----
saving (Ns)
a- B

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b- A
c- Bank A has the same result as Bank B
d- Real interest rate does not have any
effect on the economy
Questions from 13 to 16 are related. Question 15

Question 13 Compute the GDP (Y) growth as a

function of Capital (K) growth (when the
Consider the Cobb-Douglas production capital decreased by 30% (case B)) and
function given by:Y = A K0.6L0.4 the GDP (Y) growth as a function of
(Suppose A = 1) Labors (L) growth (when the Labors
increased by 14% (case A))
Suppose that immigration increases the
labor force by 14 percent. What happens a- (ΔY/Y)A= +5.6% ; (ΔY/Y)B = +18%
to total output (in percent) (YT)? The b- (ΔY/Y)A= -5.6% ; (ΔY/Y)B = +18%
rental price of capital (RK)? The real c- (ΔY/Y)A=+5.6 % ; (ΔY/Y)B = -18%
wage (WL)? (case A). d- (ΔY/Y)A=-5.6% ; (ΔY/Y)B = -18%

a- YT increase by 5.38% ; RK decrease

by 5.38% ; WL decrease by 7.56% Question 16
b- YT increase by 5.38% ; RK increase by
5.38% ; WL decrease by 7.56% Y = A K-0.8L1.8 (Suppose A = 1)
c- YT increase by 5.38% ; RK decrease
by 5.38% ; WL increase by 7.56% Suppose that pandemic decreases the
d- YT increase by 5.38% ; RK increase by labor force by 20 percent. What happens
5.38% ; WL increase by 7.56% to total output (in percent) (YT)? The
rental price of capital (RK)? The real
wage (WL)?
Question 14
a- YT increase by 33.07%, ; RK increase
Suppose the stock of capital decreases by 33.07% ; WL decrease by 16.34%
by 30%.What happens to total output (in b- YT increase by 33.07%, ; RK increase
percent) (YT)? The rental price of capital by 33.07% ; WL increase by 16.34%
(RK)? The real wage (WL)? (case B) c- YT decrease by 33.07%, ; RK decrease
by 33.07% ; WL increase by 16.34%
a- YT decrease by 19.26% ; RK decrease d- No answer
by 15.33% ; WL decrease by 19.26%
b- YT decrease by 72.54% ; RK increase
by 96.37% ; WL increase by 27.45%
c- YT decrease by 19.26% ; RK increase
by 15.33% ; WL decrease by 19.26%
d- YT decrease by 72.54% ; RK decrease
by 96.37% ; WL increase by 72.54%

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Questions from 17 to 18 are related. Question 20

Question 17 Which of the following policy actions by

a central bank is likely to increase the
People hold 2/5 of their money in the money supply?
form of currency and 3/5 as bank
deposits. Banks hold a 1/8 of their a- Increasing the discount rate.
deposits in reserve. b- Increasing reserve requirements.
c- Buying government bonds in open
Compute the value of the money market operations.
multiplier (m) d- All of these will increase the money
supply. creasing reserve
a- 2.66666 requirements.
b- 2.20689
c- 2.10526
d- 1.14285 Question 21

Macroeconomists study
Question 18
a. the decisions of individual households
Compute the value of the money supply and firms.
when the value of the monetary base b. the interaction between households
equal $17500 and firms.
c. economy-wide phenomena.
a- $46666.55 d. regulations imposed on firms and
b- $36842.05 unions.
c- $19999.87
d- $38620.57
Question 22

Question 19 Which of the following topics are more

likely to be studied by a macroeconomist
The three main tools of monetary policy than by a microeconomist?
are
a- the effect of taxes on the prices of
a- fiat, commodity, and deposit money. airline tickets, and the profitability of
b- open-market operations, reserve automobile-manufacturing firms
requirements, and the discount rate. b- the price of beef, and wage
c- the money supply, government differences between genders
purchases, and taxation. c- how consumers maximize utility, and
d- government expenditures, taxation, how prices are established in markets
and reserve requirements. for agricultural products

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d- the percentage of the labor force that
is out of work, and differences in
average income from country to
country

Question 23 Question 25

Which of the following statements about

GDP is correct? A steel company sells some steel to a
bicycle company for $150. The bicycle
a- GDP measures two things at once: the company uses the steel to produce a
total income of everyone in the bicycle, which it sells for $250. Taken
economy and the total expenditure on together, these two transactions
the economy’s output of goods and contribute
services.
b- Money continuously flows from a- $150 to GDP.
households to firms and then back to b- $250 to GDP.
households, and GDP measures this c- between $250 and $400 to GDP,
flow of money. depending on the profit earned by the
c- GDP is generally regarded as the best bicycle company when it sold the
single measure of a society’s bicycle.
economic wellbeing. d- $400 to GDP.
d- All of the above are correct.

Question 26
Question 24
Which of the following is included in the
Which of the following is included in the investment component of GDP?
calculation of GDP?
a- households’ purchases of newly
a- The purchase of tutoring services constructed homes
from a tutor who holds citizenship b- net additions to firms’ inventories
outside the country but resides within c- firms’ purchases of capital equipment
the country. d- All of the above are correct.
b- The purchase of a new edition of a
foreign textbook that was produced in
a different nation.
c- The purchase of ink and paper
supplies by a textbook company for
the production of new textbooks.
d- The purchase of a used textbook from
a friend who took the same class last
year.

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Question 27 Question 29

Which of the following statements about The consumer price index is used to
nominal GDP and real GDP is correct?
a- monitor changes in the level of
a- Nominal GDP is a better gauge of wholesale prices in the economy.
economic well-being than real GDP. b- monitor changes in the cost of living
b- Real GDP is a better gauge of over time.
economic well-being than nominal c- monitor changes in the level of real
GDP. GDP over time.
c- Real GDP and nominal GDP are d- monitor changes in the stock market.
equally good measures of economic
well-being.
d- Neither nominal nor real GDP Question 30
provide a measure of economic well-
being. The table below lists the per liter prices
of gas and milk for the months of April,
May, and June. Assume that the typical
Question 28 consumer buys 60 liters of gas and 4
liters of milk each month, and that April
Which of the following correctly lists is the base period.
what is included in the consumption
component of GDP? Month Price of Gas Price of Milk
April $2.00 $3.50
a- household purchases of services and May $3.50 $3.25
household purchases of nondurable June $3.85 $3.58
goods but not any household
purchases of durable goods Refer to the table above. What is the
b- household purchases of nondurable consumer price index for May?
goods and durable goods other than
residential construction but not a- 60
household purchases of services b- 132
c- household purchases of services, c- 166
nondurable goods, and all durable d- 123
goods
d- household purchases of services,
nondurable goods, and durable goods
other than residential construction

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7
 Questions Answers
Question 1 D
Question 2 D
Question 3 B
Question 4 D
Question 5 C
Question 6 A
Question 7 B
Question 8 C
Question 9 C
Question 10 B
Question 11 B
Question 12 A
Question 13 B
Question 14 C
Question 15 C
Question 16 D
Question 17 C
Question 18 B
Question 19 B
Question 20 C
Question 21 C
Question 22 D
Question 23 D
Question 24 A
Question 25 B
Question 26 D
Question 27 B
Question 28 D
Question 29 B
Question 30 C
Table to complete.