Professor: Alan G. Isaac                                               Fall 2014
ECON-372 MIDTERM EXAMINATION

Instructions: ALL QUESTIONS ARE EQUALLY WEIGHTED. Choose the one best answer.
The exam is closed books, closed notes. All variables are as defined in class.
GOOD LUCK!!

MULTIPLE CHOICE Answer all 60 questions.

1. Which of the following is an example of a “stock” variable?
(a) interest rate
(b) gross private domestic investment
(c) nominal GDP
(d) real GDP
(e) None of the above

2. Which of the following is an example of a “flow” variable?
(a) interest rate
(b) gross private domestic investment
(c) nominal GDP
(d) real GDP
(e) all of the above

3. GDP is a rough measure of a nation’s
(a) accumulated claims on other countries
(b) total income from all sources
(c) production of final goods and services
(d) status in the world
(e) happiness

4. Nominal GDP in the US in 2013 was approximately
(a) USD 18T / year
(b) USD 17T / year
(c) USD 16T / year
(d) USD 15T / year
(e) USD 14T / year

5. In the US, consumption is very roughly what percentage of GDP?
(a) 80
(b) 70
(c) 60
(d) 50
(e) 40


6. In the US, government expenditures on final goods and services is very
roughly what percentage of GDP?
(a) 50
(b) 40
(c) 30
(d) 20
(e) 10

7. If a nation invests more than it saves, it will
(a) borrow from abroad
(b) run a current account deficit
(c) run a current account surplus
(d) a. and b.
(e) a. and c.

8. As a percentage of GDP, the US current account deficit
(a) grew markedly in the 1980s
(b) is as large as it has ever been
(c) has recovered somewhat since the noughts
(d) a. and b.
(e) a. and c.

9. Suppose a country’s net international investment position is negative at about 25% of its GDP. Suppose
that foreign assets and liabilities both yield 4% per year. We expect its income account to show
(a) a deficit of about 4.0% of GDP
(b) a deficit of about 1.0% of GDP
(c) perfect balance, because the yields on assets and liabilities are identical
(d) a surplus of about 1.0% of GDP
(e) a surplus of about 4.0% of GDP

10. Ceteris paribus, which of the following can help a country reduce its current account deficit?
(a) an increase in private saving
(b) a decline in the fiscal deficit
(c) a reduction in domestic investment
(d) a. and c.
(e) all of the above

11. Suppose one US dollar buys 80 Japanese yen or 0.8 euro. The EUR-JPK exchange rate is
(a) 100
(b) 10
(c) 1
(d) 0.1
(e) 0.01