ECO 4223 Final Exam – Questions With Detailed Solutions

ECO 4223 Final Exam | questions andan u u u u u u u




swers | RATEDA+ u u u




Which of the following contributes to GDP?
u u u u u u




A) The sales price of homes built 30 years ago.
u u u u u u u u




B) Intermediate goods, which are used to produce final goods.C) u u u u u u u u u u




Both A and B u u u




D) Value of all final goods and services. -
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D) Value of all final goods and services.W u u u u u u u u




hich of the following is true regarding GDP?
u u u u u u u




A) GDP does not include intermediate goods, which are used to produce other finalgood
u u u u u u u u u u u u u




s. (Example: Tires used to make a car)
u u u u u u u




B) GDP includes the purchases of goods and services in the past.C) N
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one of the above are true.
u u u u u




D) GDP includes the purchases of stocks and bonds. -
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A) GDP does not include interm u u u u u




ediate goods, which are used to produce other final goods. (Example: Tires usedto make a c
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ar)
If the CPI in 2004 is 200, and in 2005 the CPI is 180, the rate of inflation from 2004 to2005 is
u u u u u u u u u u u u u u u u u u u u u u




A) 20%. u




B) 10%. u




C) 0%. u




D) -10%. - u D) -10% u u




If the Nominal GDP in 2001 is $9 trillion, and 2001 real GDP in 1996 price is $6 trillion,the GD
u u u u u u u u u u u u u u u u u u u u




P deflator price index is
u u u u




A) 200 u




B) 150 u




C) 7 u




D) 100 - B) 150
u u u




If the CPI is 120 in 1996 and 180 in 2002, then between 1996 and 2002, prices haveincreased by
u u u u u u u u u u u u u u u u u u u




A) 180%. u




B) 80%. u




C) 60%. u




D) 50%. - D) 50%
u u u




What is the inflation rate if the GDP deflator in 2012 was 112, and the GDP deflator in2013 was 1
u u u u u u u u u u u u u u u u u u u u




15?
A) 2.68% u




B) 0.72% u




C) 3.42% u




D) 1.70% - A) 2.68%
u u u




What is the nominal GDP in 2010, if real GDP in 2009 was $12 billion and the GDPdeflator is 108
u u u u u u u u u u u u u u u u u u u u




?
A) $10.24 billion
u u u




B) $9.0 billion
u u

, C) $8.48 billion u




D) $12.96 billion - D) $12.96 billion u u u u




If the expected inflation decreases, the real cost of borrowing
u u u u u u u u u




and thesu u u




pply of bonds decreases causing the supply curve to shift
u u . u u u u u u u




A) Falls, shifts to the right B)
u u u u u u u




Rises, shifts to the left C) Ris u u u u u u




es, shifts to the right u u u u




D) Falls, shifts to the left -
u B) Rises, shifts to the left u u u u u u u u u u




If the nominal rate of interest is 2 percent, and the expected inflation rate is -
u u u u u u u u u u u u u u u




10 percent,the real rate of interest is
u u u u u u u




A) 2%
B) 8%
C) 12% u




D) 10% - C) 12%
u u u




If you expect the inflation rate to be 12% and a 1-
u u u u u u u u u u u




year bond has a yield to maturity of7%, then the real interest rate on this bond is
u u u u u u u u u u u u u u u u u




A) 12% u




B) 2% u




C) -5% u




D) -2% - C) -5%
u u u




If you expect the inflation rate to be 15% next year and a 1-
u u u u u u u u u u u u u




year bond has a yield tomaturity of 7%, then the real interest rate on this bond is
u u u u u u u u u u u u u u u u u




A) 22% u




B) -15% u




C) -8% u




D) 7% - C) -8%
u u u




A zero coupon bond pays annual interest and has a future value of $1,000, matures in 4years an
u u u u u u u u u u u u u u u u u u




d has a yield to maturity of 6.5%. What is the present value of this bond?
u u u u u u u u u u u u u u u




A) $902.65 B) u u




$833.24 C)$
u u u




1,072.33
D) $777.32 - D) $777.32
u u u




The price of a zero coupon bond and the yield to maturity are
u u related; that
u u u u u u u u u u u




is, as the yield to maturity
u u , the price of the bond u . u u u u u u u




A) negatively, rises, falls u u




B) positively, rises, falls u u u




C) positively, rises, rises
u u u




D) negatively, falls, falls -
u A) negatively, rises, falls u u u u u u




As the price of a coupon bond increases the YTM
u u u u u u u u u




. u




A) stays the same
u u u




B) decreases
C) depends on the time to maturityD u u u u u u




) increases -
u B) decreases u u




If the interest rate on a bond rises, and you want to sell it before maturity, you will mostlikely e
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xperience a . u




A) gain