# ECO 550 Midterm Part 2 (Solution 25/25) - 88164

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Question 1 Time-series forecasting models: Answer are useful whenever changes occur rapidly and wildly are more effective in making long-run forecasts than short-run forecasts are based solely on historical observations of the values of the variable being forecasted attempt to explain the underlying causal relationships which produce the observed outcome Question 2 Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern to be found in the historical values of a variable that is being forecast. Answer opinion polling barometric forecasting econometric forecasting time-series forecasting Question 3 Consumer expenditure plans is an example of a forecasting method. Which of the general categories best described this example? Answer time-series forecasting techniques barometric techniques survey techniques and opinion polling econometric techniques input-output analysis Question 4 The type of economic indicator that can best be used for business forecasting is the: Answer leading indicator coincident indicator lagging indicator current business inventory indicator optimism/pessimism indicator Question 5 The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as: Answer econometric technique time-series forecasting opinion polling barometric technique judgment forecasting Question 6 The use of quarterly data to develop the forecasting model Yt = a +bYt?1 is an example of which forecasting technique? Answer Barometric forecasting Time-series forecasting Survey and opinion Econometric methods based on an understanding of the underlying economic variables involved Input-output analysis Question 7 Purchasing power parity or PPP says the ratios composed of: Answer interest rates explain the direction of exchange rates. growth rates explain the direction of exchange rates. inflation rates explain the direction of exchange rates. services explain the direction exchange rates. public opinion polls explain the direction of exchange rates. Question 8 If the British pound (?) appreciates by 10% against the dollar: Answer both the US importers from Britain and US exporters to Britain will be helped by the appreciating pound. the US exporters will find it harder to sell to foreign customers in Britain. the US importer of British goods will tend to find that their cost of goods rises, hurting its bottom line. both US importers of British goods and exporters to Britain will be unaffected by changes in foreign exchange rates. Question 9 If Ben Bernanke, Chair of the Federal Reserve Board, begins to tighten monetary policy by raising US interest rates next year, what is the likely impact on the value of the dollar? Answer The value of the dollar falls when US interest rates rise. The value of the dollar rises when US interest rates rise. The value of the dollar is not related to US interest rates. This is known as Purchasing Power Parity or PPP. Question 10 An increase in the exchange rate of the U.S. dollar relative to a trading partner can result from Answer higher anticipated costs of production in the U.S. higher interest rates and higher inflation in the U.S. higher growth rates in the trading partner's economy a change in the terms of trade lower export industry productivity Question 11 The import of Apple iPads assembled in Shanghai at a \$295 wholesale price (\$213 cost and \$82 profit margin) adds more than it should to the U.S. trade deficit with China because Answer Chinese assembly labor represents only 47 % of the wholesale cost the iPad’s popularity has triggered an enormous number of unit sales wholesale prices only count in the trade statistics if final product prices are higher as with foreign-assembled minivans, most of the subassembly components come from the U.S. the Chinese yuan is a managed currency Question 12 In a recession, the trade balance often improves because Answer service exports exceed manufactured good exports banks sell depressed assets fewer households can afford luxury imports direct investment abroad declines the capital account exceeds the current account Question 13 In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for: Answer stage II stages I and II when Ep = 1 stage III Question 14 Which of the following is never negative? Answer marginal product average product production elasticity marginal rate of technical substitution slope of the isocost lines Question 15 The marginal rate of technical substitution may be defined as all of the following except: Answer the rate at which one input may be substituted for another input in the production process, while total output remains constant equal to the negative slope of the isoquant at any point on the isoquant the rate at which all combinations of inputs have equal total costs equal to the ratio of the marginal products of X and Y Question 16 Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ____. Answer marginal cost variable cost marginal rate of technical substitution total cost Question 17 The primary purpose of the Cobb-Douglas power function is to: Answer allow one to make estimates of cost-output relationships allow one to make predictions about a resulting increase in output for a given increase in the inputs aid one in gaining accurate empirical values for economic variables calculate a short-run linear total cost function Question 18 The isoquants for inputs that are perfect complements for one another consist of a series of: Answer right angles parallel lines concentric circles right triangles Question 19 The cost function is: Answer a means for expressing output as a function of cost a schedule or mathematical relationship showing the total cost of producing various quantities of output similar to a profit and loss statement incapable in being developed from statistical regression analysis Question 20 What method of inventory valuation should be used for economic decision-making problems? Answer book value original cost current replacement cost cost or market, whichever is lower historical cost Question 21 Economies of Scope refers to situations where per unit costs are: Answer Unaffected when two or more products are produced Reduced when two or more products are produced Increased when two or more products are produced Demonstrating constant returns to scale Demonstrating decreasing returns to scale Question 22 According to the theory of cost, specialization in the use of variable resources in the short-run results initially in: Answer decreasing returns and declining average and marginal costs increasing returns and declining average and marginal costs increasing returns and increasing average and marginal costs decreasing returns and increasing average and marginal costs Question 23 Economies of scale exist whenever long-run average costs: Answer Increase as output is increased Remain constant as output is increased Decrease as output is increased Decline and then rise as output is increased Question 24 If TC = 321 + 55Q - 5Q2, then average total cost at Q = 10 is: Answer 10.2 102 37.1 371 321 Question 25 An example of a time series data set is one for which the: Answer data would be collected for a given firm for several consecutive periods (e.g., months). data would be collected for several different firms at a single point in time. regression analysis comes from data randomly taken from different points in time. data is created from a random number generation program. use of regression analysis would impossible in time series.
Solution Description

Question 1

Time-series forecasting models:

Answer

are useful whenever changes occur rapidly and wildly

are more effective in making long-run forecasts than short-run forecasts

are based solely on historical observations of the values of the variable being forecasted

attempt to explain the underlying causal relationships which produce the observed outcome Question 2

Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern to be found in the historical values of a variable that is being forecast.

Answer

opinion polling

barometric forecasting

econometric forecasting

time-series forecasting

Question 3

Consumer expenditure plans is an example of a forecasting method. Which of the general categories best described this example?

Answer

time-series forecasting techniques

barometric techniques

survey techniques and opinion polling

econometric techniques

input-output analysis

Question 4

The type of economic indicator that can best be used for business forecasting is the:

Answer

leading indicator

coincident indicator

lagging indicator

current business inventory indicator

optimism/pessimism indicator

Question 5

The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as: Answer

econometric technique

time-series forecasting

opinion polling

barometric technique

judgment forecasting

Question 6

The use of quarterly data to develop the fore

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