Macroeconomic Module Questions
Identify each of the following statements as positive or normative, and explain your answer. a. Society should take measures to prevent people from engaging in dangerous personal behavior. b. People who engage in dangerous personal behavior impose higher costs on society through higher medical costs.
Section 1, Module 1
In what type of economic analysis do questions have a "right" or "wrong" answer? In what type of economic analysis do questions not necessarily have a "right" answer? On what type of economic analysis do econo- mists tend to disagree most frequently? Why might economists disagree? Explain (5 points).
Section 1, Module 1
Provide an example of a resource from each of the four categories of resources:
Section 1, Module 1
What type of resource is each of the following? a. time spent flipping hamburgers at a restaurant b. a bulldozer c. a river
Section 1, Module 1
The Hatfield family lives on the east side of the Hatatoochie River and the McCoy family lives on the west side. Each family's diet consists of fried chicken and corn on the cob, and each is self-sufficient, raising its own chickens and growing its own corn. Assume the Hatfield family has a comparative advantage in the production of corn. a. Draw a correctly labeled graph showing a hypothetical production possibilities curve for the McCoy family. b. Which family has the comparative advantage in the production of chickens? Explain. c. Assuming that each family is producing efficiently, how can the two families increase their consumption of both chicken and corn (5 points)?
Section 1
You make $45,000 per year at your current job with Whiz Kids Consultants. You are considering a job offer from Brainiacs, Inc., which would pay you $50,000 per year. Is each of the following elements an opportunity cost of accepting the new job at Brainiac, Inc.? Answer yes or no, and explain your answer. a. the increased time spent commuting to your new job b. the $45,000 salary from your old job c. the more spacious office at your new job
Section 1, Module 1
Define the term resources, and list the four categories of resources. What characteristic of resources results in the need to make choices?
Section 1, Module 1 FRQ points: 1 point: Resources are anything that can be used to produce something else. 1 point each: The four categories of the economy's resources are land, labor, capital, and entrepreneurship. 1 point: The characteristic that results in the need to make choices is scarcity.
Define inflation, and explain why an increase in the price of donuts does not indicate that inflation has occurred (2 points).
Section 1, Module 2
Describe two types of models used by economists.
Section 1, Module 2
Describe who gets hurt in a recession and how they are hurt.
Section 1, Module 2
Define an expansion and economic growth, and explain the difference between the two concepts.
Section 1, Module 2 FRQ points: 1 point: An expansion is the period of recovery after an economic downturn. 1 point: Economic growth is an increase in the produc- tive capacity of the economy. 1 point: An expansion can occur regardless of any increase in the economy's long-term potential for production, and it only lasts until the next downturn, while economic growth increases the economy's ability to produce more goods and services over the long term.
Assume that an economy can choose between producing food and producing shelter at a constant opportunity cost. Draw a correctly labeled production possibilities curve for the economy. On your graph: a. Use the letter E to label one of the points that is productively efficient. b. Use the letter U to label one of the points at which there might be unemployment. c. Use the letter I to label one of the points that is not feasible (5 points).
Section 1, Module 3
True or false? Explain your answer. a. An increase in the amount of resources available to Tom for use in producing coconuts and fish does not change his production possibilities curve. b. A technological change that allows Tom to catch more fish relative to any amount of coconuts gathered results in a change in his production possibilities curve. c. Points inside a production possibilities curve are efficient and points outside a production possibili- ties curve are inefficient.
Section 1, Module 3
Refer to the graph on pg. 23 of the textbook. Assume the country is producing at point C. a. Does this country's production possibilities curve exhibit increasing opportunity costs? Explain. b. If this country were to go to war, the most likely move would be from point C to which point? Explain. c. If the economy entered into a recession, the country would move from point C to which point? Explain.
Section 1, Module 3 FRQ points: 1 point: Yes 1 point: The PPC is concave (bowed outward), so with each additional unit of butter produced, the opportunity cost in terms of gun production (indicated by the slope of the line) increases. Likewise, as more guns are produced, the opportunity cost in terms of but- ter increases. 1 point: B 1 point: The country would choose an efficient point with more (but not all) military goods with which to fight the war. Point A would be an unlikely choice because at that point there is no production of any social goods, some of which are needed to maintain a minimal standard of living. 1 point: E 1 point: A recession, which causes unemployment, is represented by a point below the PPC.
In Italy, an automobile can be produced by 8 workers in one day and a washing machine by 3 workers in one day. In the United States, an automobile can be pro- duced by 6 workers in one day, and a washing machine by 2 workers in one day. a. Which country has an absolute advantage in the production of automobiles? In washing machines? b. Which country has a comparative advantage in the production of washing machines? In automobiles? c. What type of specialization results in the greatest gains from trade between the two countries?
Section 1, Module 4
Refer to the story of Tom and Hank illustrated by Figure 4.1 (pg. 29) in the text. Explain why Tom and Hank are willing to engage in a trade of 1 fish for 11⁄2 coconuts.
Section 1, Module 4
These two countries are producing textiles and wheat using equal amounts of resource. Refer to the second graph on pg. 31 of the textbook. a. What is the opportunity cost of producing a bushel of wheat for each country? b. Which country has the absolute advantage in wheat production? c. Which country has the comparative advantage in textile production? Explain (5 points).
Section 1, Module 4
Refer to the first graph on pg. 31 of the textbook. a. What is the opportunity cost of a bushel of corn in each country? b. Which country has an absolute advantage in computer production? Explain. c. Which country has a comparative advantage in corn production? Explain. d. If each country specializes, what good will Country B import? Explain. e. What is the minimum price Country A will accept to export corn to Country B? Explain.
Section 1, Module 4 FRQ points: 1 point: Country A, 1⁄4 computer; Country B, 11⁄4 computers 1 point: Country B 1 point: Because Country B can produce more computers than Country A (500 versus 200) 1 point: Country A 1 point: Because Country A can produce corn at a lower opportunity cost (1⁄4 versus 11⁄4 computers) 1 point: Corn 1 point: Country B has a comparative advantage in the production of computers, so it will produce computers and import corn (Country A has a comparative advantage in corn production, so it will specialize in corn and import computers from Country B). 1 point: 1⁄4 computer 1 point: Country A's opportunity cost of producing corn is 1⁄4 computer, so that is the lowest price it will accept to sell corn to Country B.
