ECO 301 MACROECONOMIC THEORY
UNIVERSITY OF MIAMI
DEPARTMENT OF ECONOMICS
Dr. S. Nuray Akin
PRACTICE FOR MIDTERM EXAM II
and HW 4
Instructions: Please explain all your answers to the multiple choice questions when
submitting this practice exam as a homework. You also need to submit all your work for
the solutions to the second part (model questions).
Good luck!
PART I MULTIPLE CHOICE QUESTIONS
Instructions: This part consists of 20 multiple-choice questions, each of which is worth 3 points.
Circle one and only one answer.
1. An increase in the rate of interest will increase household saving because
a. It will shift the saving supply to the right.
b. Investment demand will decrease.
c. The investment demand curve will shift up and hence saving will go up.
d. It makes future consumption cheaper relative to present consumption.
2. According to the menu cost theory, unemployment may exist because
a. It is costly for firms to frequently change their price lists.
b. Of legal restrictions, like minimum wage laws.
c. Prices are rigid downwards.
d. Workers are paid less than their marginal products.
3. The cost of investment for a firm is
a. The nominal interest rate.
b. The real interest rate.
c. The inflation rate.
d. None of the above.
4.In a closed economy, if the investment demand curve is I(r) = 1/ r and the saving supply curve is S(r) = 5r,
then the equilibrium interest rate will be
a. -20%.
b. 25%.
c. 45%.
d. 0.45%.
1
UNIVERSITY OF MIAMI
DEPARTMENT OF ECONOMICS
Dr. S. Nuray Akin
PRACTICE FOR MIDTERM EXAM II
and HW 4
Instructions: Please explain all your answers to the multiple choice questions when
submitting this practice exam as a homework. You also need to submit all your work for
the solutions to the second part (model questions).
Good luck!
PART I MULTIPLE CHOICE QUESTIONS
Instructions: This part consists of 20 multiple-choice questions, each of which is worth 3 points.
Circle one and only one answer.
1. An increase in the rate of interest will increase household saving because
a. It will shift the saving supply to the right.
b. Investment demand will decrease.
c. The investment demand curve will shift up and hence saving will go up.
d. It makes future consumption cheaper relative to present consumption.
2. According to the menu cost theory, unemployment may exist because
a. It is costly for firms to frequently change their price lists.
b. Of legal restrictions, like minimum wage laws.
c. Prices are rigid downwards.
d. Workers are paid less than their marginal products.
3. The cost of investment for a firm is
a. The nominal interest rate.
b. The real interest rate.
c. The inflation rate.
d. None of the above.
4.In a closed economy, if the investment demand curve is I(r) = 1/ r and the saving supply curve is S(r) = 5r,
then the equilibrium interest rate will be
a. -20%.
b. 25%.
c. 45%.
d. 0.45%.
1
