Econ 221 Exam 2

In the economy of Ukzten in 2010, consumption was $3000, exports were $400, GDP was $5000, imports were $600, and investment was $1100. What were Ukzten's government purchases in 2010?

$1100

Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is

$150

Ryan lives in an apartment where he pays $7,000 a year in rent. Alexis lives in a house that could be rented for $14,000 a year. How much do these housing services contribute to GDP?

$21,000

In the base year, the GDP deflator is always

100

Social Security payments are indexed for inflation using

CPI

If 2004 is the base year, then the inflation rate for 2005 equals

CPI in 2005 - CPI in 2004 / CPI in 2004 x 100

The measure of the cost of a standard basket of goods and services in any period relative to the cost of the same basket of goods and services in the base year is called the

Consumer price index

The inflation rate in year 2 equals

GDP in Year 2 - GDP in Year 1/GDP deflator in Year 1 x 100

Which of the Ten Principles of Economics does welfare economics explain more fully?

Markets are usually a good way to organize economic activity

Which of the following is correct?

Nominal GDP equals real GDP in the base year

With which of the Ten Principles of Economics is the study of international trade most closely connected?

Trade can make everyone better off

When a country moves away from a free trade position and imposes a tariff on imports, it causes

a decrease in total surplus in the market.

Which of the following is a way to compute GDP?

add up the market values of all final goods and services

If an allocation of resources is efficient, then

all potential gains from trade among buyers are sellers are being realized

The primary purpose of measuring the overall level of prices in the economy is to

allow for the comparison of dollar figures from different points in time.

GDP per person tells us the income and expenditure of the

average person in the economy

On a graph, consumer surplus is represented by the area

below the demand curve and above price.

An increase in the price of dairy products produced domestically will be reflected in

both the GDP deflator and the consumer price index

According to the circular-flow diagram GDP

can be computed as the total income paid by firms or as expenditures on final goods and services

For the purpose of calculating GDP, investment is spending on

capital equipment, inventories, and structures, including household purchases of new housing

Which of the following is not included in GDP?

carrots grown in your garden and eaten by your family

Trade among nations is ultimately based on

comparative advantage

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

consumer does not purchase the good

The goal of the consumer price index is to measure changes in the

cost of living

In the actual economy, households

divide their income among spending, taxes, and saving

A tariff on a product makes

domestic sellers better off and domestic buyers worse off

Macroeconomists study

economy-wide phenomena

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the largest?

education & communication

For an economy as a whole, income must equal expenditure because

every dollar of spending by some buyer is a dollar of income for some seller

Because every transaction has a buyer and a seller

every transaction contributes equally to an economy's income and to its expenditure

The world price of a simple electronic calculator is $5.00. Before Singapore allowed trade in calculators, the price of a calculator there was $4.00. Once Singapore began allowing trade in calculators with other countries, Singapore began

exporting calculators and the price of a calculator in Singapore increased to $5.00

If the world price of textiles is higher than Vietnam's domestic price of textiles without trade, then Vietnam

has a comparative advantage in textiles

A consumer's willingness to pay directly measures

how much a buyer values a good.

Welfare economics is the study of

how the allocation of resources affects economic well-being.

Grapes are considered intermediate goods

if the purchaser uses them to make wine to sell others but not if the purchaser eats them

If an economy's GDP falls, then it must be the case that the economy's

income and expenditure both fall

Gross domestic product measures

income and expenditures

For an economy as a whole,

income must equal expenditure

A tariff on a product

increases the domestic quantity supplied

The term economists use to describe a situation in which the economy's overall price level is rising is

inflation

The consumer price index is used to

monitor changes in the cost of living over time.

The GDP deflator is the ratio of

nominal GDP to real GDP multiplied by 100

The inflation rate is defined as the

percentage change in the price level from the previous period

In addition to the consumer price index, the Bureau of Labor Statistics also calculates the

producer price index

Which of the following is always measured in prices from a base-year?

real but not nominal GDP

A tax on an imported good is called a

tariff

If the CPI was 110 this year and 100 last year, then

the cost of the CPI basket of goods and services increased by 10 percent this year.

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

the country will be an importer of the good

What basket of goods and services is used to construct the CPI?

the goods and services that are typically bought by consumers as determined by government surveys

The percentage change in the price level from one period to another is called

the inflation rate

Efficiency is attained when

total surplus is maximized

GDP is defined as the

value of all final goods and services produced within a country in a given period of time

A seller's opportunity cost measures the

value of everything she must give up to produce a good

At the equilibrium price of a good, the good will be purchased by those buyers who

value the good more than price

In a simple circular-flow diagram, households buy goods and services with the income they get from

wages, rents and profits

The price of cotton that prevails in international markets is called the

world price of cotton