1.Fill in the table below. The current wage is $200 and the price of output (Q) is $30. Each box is worth ½ of a point. Enter whole numbers only (no commas, no decimals, no dollar signs) and if a value is negative, be sure to enter the negative sign.
L Q MPL MRP Marginal Profit Total Profit
0 0 - - - - - - - - - - - - - - - - - - - - - 0
1 7 
2 15 
3 22 
4 28 
5 33 
6 37 
2.Use the table from question 1 to complete the next six questions. Enter the correct values in the boxes below. Enter only whole numbers (no commas, no decimals, no dollar signs). Each fill-in-the-blank below is worth 3 points.
This profit maximizing firm will hire workers.
3.This profit maximizing firm will produce units of output.
4.This firm's maximum profit equals .
5.Now suppose that the wage falls to $170. You will need to recalculate the values from the table, given this new wage, to answer the questions below.
This profit maximizing firm will now hire workers.
6.This profit maximizing firm will now produce units of output.
7.This firm's maximum profit now equals .
8.Use the following information to answer the next nine questions. Each fill-in-the-blank is worth 3 points.

If your answer is in decimal form, enter it with 2 decimal places. For example, if your answer is .4, enter it into the fill-in-the-blank as .40, or if your answer is 1.4, enter it into the fill-in-the-blank as 1.40. If there are no decimals in your answer, you will simply enter the number; so if your answer is 2, enter 2 with no decimals. Do not use commas.

Suppose the economy is characterized as follows:

AE = C + I + G + (X-M)
C = 400 + .75(Y - T) - 30 (r)
I = 500 - 50(r)
G = 400
X- M = -25
T = 80
r = 5
Price level P is fixed at 1 (P=1)
Use the information above to get expressions for the consumption function and the AE equation.

The vertical intercept for the consumption function is .
9.The slope of the consumption function is .
10.The vertical intercept of the AE equation is .
11.The slope of the AE equation is .
12.Equilibrium output is equal to .
13.Equilibrium consumption is equal to .
14.Suppose the Consumption function changes to C=500 +.75(Y-T) - 30(r).
The new value of equilibrium output is .
15.The new value of equilibrium consumption is .
16.The Consumption function is still C=600 +.75(Y-T) - 30(r). The Keynesian spending multiplier in this economy is .
17.Use the following information to answer the next four questions. Each multiple choice question is worth 3 points.
mm = money multiplier = .8
MB = monetary base = 3000
Money Demand: Md = P X [ a0 + .5 (Y) - 200 (i) ]
where: a0 = 1000, Y = 3600

For simplicity we hold the price level fixed at 1 and assume that inflationary expectations are fixed at 2%. Y is also held constant in this problem.
What is the equilibrium interest rate (i)?
A) 1%
B) 2%
C) 2.5%
D) 3%
E) None of the above are correct
18.Suppose a0 falls to 800. What is the new equilibrium interest rate?
A) 1%
B) 2%
C) 2.5%
D) 3%
E) None of the above are correct
19.Suppose that the Fed wanted to keep interest rates constant at their initial level (the value you found in #1). What would the Fed have to do in terms of open market operations to achieve this?
A) 200 in open market sales
B) 200 in open market purchases
C) 250 in open market sales
D) 250 in open market purchases
E) 2200 in open market sales
20.Given the interest rate you found in #18, what is the ex-ante real interest rate?
A) -1%
B) 0%
C) 1%
D) 2%
E) None of the above are correct
21.Suppose the price index in State College, PA is 122 and 263 in New York City (as always, we assume the basket is exactly the same in both locations). Suppose also that you are currently making $75,000 in State College. What income do you need to be offered in New York City to maintain the exact same purchasing power that you currently have in State College? Round your answer to the nearest dollar.
A) $161,680
B) $34,791
C) $197,250
D) $91,500
E) None of the above are correct
22.Given equation Y=300+.7Y, what does Y equal?
A) 1000
B) 90
C) 510
D) 176.5
E) None of the above are correct
23.Which of the following statements is true about scarcity?
A) Scarcity refers to the situation in which unlimited wants exceed limited resources.
B) Scarcity is not a problem for the wealthy.
C) Scarcity is only a problem when a country has too large a population.
D) Scarcity arises when there is a wide disparity in income distribution.
24.Which of the following questions or statements regarding medical school is normative?
A) How do changes in expected future incomes affect the decisions of medical students about which specialty to choose?
B) Medical students who enter specialized fields make a larger contribution to society than do students who enter primary care.
C) What role does tuition play in a student's decision about whether to attend medical school?
D) Have tuition increases had a large effect or a small effect on the number of applications to medical school?
25.In one hour of labor input, South Korea can produce either 100 computer chips or 50 bed linens. In the U.S., in one hour of labor input, either 150 computer chips or 100 bed linens can be made. Select the correct response below.
A) The U.S. has a comparative advantage in computer chips manufacturing.
B) Both the U.S. and S. Korea have comparative advantages in computer chips manufacturing.
C) S. Korea has a comparative advantage in computer chips manufacturing.
D) S. Korea has an absolute advantage in bed linen production.
E) None of the above are correct
26.In economics, the term ________ means "additional" or "extra."
A) allocative
B) marginal
C) equity
D) optimal
27.Jen makes $12 per hour and Sammie makes $20 per hour. Both Jen and Sammie like to eat hamburgers that cost $4 each. Select the correct answer below.
A) Sammie's real wage is equal to 5 hamburgers
B) Sammie's real wage is higher than Jen's real wage
C) Jen's real wage is higher than Sammie's real wage
D) Jen and Sammie's real wages are equal
E) Both a and b are correct
28.In May 2009, the U.S. auto industry experienced a 34 percent decline in sales compared to May 2008. The automobile industry was experiencing the effects of
A) deflation.
B) the underground economy.
C) the business cycle.
D) depreciation.
29.Product Quantity Price
Sweatshirts 50 $35.00
Dental examinations 40 75.00
Coffee drinks 1000 4.00
Chewing gum 2000 0.50

Refer to the table above. Suppose that a simple economy produces only sweatshirts, dental examinations, coffee drinks, and chewing gum. Using the information in the above table, nominal GDP for this simple economy equals:
A) 3,090 units
B) $7,250
C) $8,750
D) $9,750
E) None of the above are correct
30.Year Nominal GDP Real GDP
2008 $7400 $7537
2009 7813 7813
2010 8301 8165
2011 8760 8516

Refer to Table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The base year used in calculating real GDP is

A) 2008
B) 2009
C) 2010
D) 2011
31.Total population 20000
Working-age population 15000
Employment 1000
Unemployment 100

Consider the data above for a simple economy.

The unemployment rate for this simple economy equals

A) (100/1,000) × 100
B) (100/1,100) × 100
C) (100/15,000) × 100
D) (100/20,000) × 100
32.Year CPI
2010 207
2011 215
Refer to Table above. Consider the following values of the consumer price index for 2010 and 2011. The inflation rate for 2011 was equal to
A) 215 percent
B) 21.5 percent
C) 3.72 percent
D) 3.86 percent
33.Which of the following will shift the aggregate demand curve to the right, ceteris paribus?
A) an increase in interest rates
B) a decrease in disposable income
C) a decrease in expected profits for firms
D) an increase in net exports
34.The monetary policy target the Federal Reserve focuses primarily on today is
A) the unemployment rate.
B) M1.
C) the inflation rate.
D) the interest rate.
35.If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then
A) the dollar has depreciated.
B) the dollar has appreciated.
C) the British pound has depreciated.
D) the British pound has stayed constant in value.
36.Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfill those wants.
A) True
B) False
37.If a country produces only two goods, then it is not possible to have a comparative advantage in the production of both those goods.
A) True
B) False
38.The circular flow of income shows that GDP can be measured as the sum of wages, interest, rent, and profits received by households or total expenditures on goods and services by households, firms, government, and the rest of the world.
A) True
B) False
39.Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.
A) True
B) False
40.As firms hire additional units of labor, eventually the marginal revenue product will always decrease.
A) True
B) False
41.In a consumption function with income (Y) on the horizontal axis and consumption (C) on the vertical axis, a rise in stock market wealth, all else constant, will result in a movement along the consumption function.
A) True
B) False
42.The more 'sticky' nominal wages and other input costs are, the steeper the slope of the aggregate supply curve and therefore, the less effective demand side policies in terms of effecting real output.
A) True
B) False
43.During each FOMC meeting policymakers discuss the current state of economic affairs in each of the 12 regional districts that make up the US. In fact, the Presidents of all the regional Federal Reserve Banks attend all FOMC meetings and discuss the conditions in their respective districts.
A) True
B) False
44.During the lead up to Y2K, the Fed, to keep the federal funds rate from rising, had to conduct open market sales. This action is referred to as 'accommodating' the shock to reserve demand.
A) True
B) False
45.Cutting the corporate income tax can potentially increase the pace of technological change resulting in the aggregate supply curve shifting to the right.
A) True
B) False
46.Keynes believed that it was the responsibility of the government to use its powers to increase production, incomes and jobs.
A) True
B) False
47.Export oriented countries prefer a stronger currency relative to a weaker currency.
A) True
B) False