ECN

Economics 211	Macroeconomic Principles
Exam #1	Due date: Thursday the 6th of March 2017 An exam submitted after 6 March will earn 75% credit. No exam will be accepted after 13 March 2017
Name ________________________________	Instructor: Brian B. Young
The value of this exam is 100 points.	Please show your work where appropriate!

Multiple Choice

2 points each

To answer multiple choice questions, please open your MCCCD Canvas account and complete the quiz entitled “Exam #1 Multiple Choice.” Good luck!

Please use a word processor to submit short answers. Be sure to put your name on all submitted work so you may receive proper credit. Good luck!

Short Answer

10 points each

1)

When the expected future price of a good falls, the supply curve shifts to the right and the demand curve shifts to the left simultaneously. What happens to the equilibrium price after the shifts? What happens to the equilibrium quantity after the shifts? Is it always possible to determine the direction of change in both the equilibrium price and quantity or is more information necessary? Use supply and demand curves to graphically illustrate your answer.

2)

A country produces only beer and poutine in the quantities and prices listed below. Use 2011 as the base year.

Year	Price of Beer	Quantity of Beer	Price of Poutine	Quantity of Poutine
2011	$2.00	200	$10	40
2012	$2.30	250	$14	50
2013	$2.75	280	$18	80

1. Calculate real and nominal GDP for the year 2012.

1. Calculate the GDP deflator for 2012 and 2013.

1. Calculate the rate of inflation for 2012.

3) Suppose that gasoline and propane are complements in production and, further, suppose that the price of gasoline suddenly rises. In the market for propane:

A. Which curve(s) shift? Demand shifts to the right / Demand shifts to the left / Supply shifts to the right / Supply shifts to the left.

B. Graph the situation in the market for propane:

P

Q

C. As a result of the increase in the price of gasoline,

i. the price of propane will increase / decrease / can’t tell

ii. the quantity of propane sold will increase / decrease / can’t tell

4)

The figure above shows a labor market in which an earned income tax has been imposed.

A. What is the amount of the tax per hour of labor?

B. How much tax revenue will the government collect each week from each worker?

C. c. How much of the tax is paid by employees? How much is paid by employers?

5)

The Labor Market

A. Why has the U.S. labor force participation rate declined so much since 2000 ?

B. Explain how it is possible that the unemployment rate, U3, could be [rising/falling] while the economy is [improving/deteriorating].

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