MACRO

If the economy was opened to free trade and the world price of $1 prevailed, the price and quantity sold of this product would be

$1 and 16 units.

If a U.S. importer can purchase 10,000 British pounds for $20,000, the rate of exchange is

$2 = 1 British pound in the United States.

Assume that the real output of a developing nation increases from $120 billion to $140 billion, while its population expands from 100 to 110 million. As a result, real income per capita has increased by about

$72 per person.

In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The trading possibilities curves suggest that the terms of trade are

1 beer for 1.5 pizzas.

Refer to the graphs. An increase in an economy's labor productivity would shift curve

AB to CD and shift curve X to Y.

How does government's power to coerce behavior tend to reduce private-sector risk?

by enforcing contracts and discouraging illegal behavior that threatens private property

Other things equal, a decrease in the price level will

cause a movement down an aggregate supply curve.

The political tendency to favor spending priorities with immediate benefits but deferred costs results in

chronic budget deficits, misdirection of stabilization policy, unfunded liabilities.

The government's ability to coerce can enhance economic efficiency by

correcting market failures.

Refer to the diagram pertaining to two nations and a specific product. Lines FA and GB are

export supply curves for two countries.

The idea of government failure includes all of the following except

extensive positive externalities from public and quasi-public goods.

Depreciation of the dollar will

increase the prices of U.S. imports but decrease the prices to foreigners of U.S. exports.

In terms of aggregate supply, a period in which nominal wages and other resource prices are fully responsive to price-level changes is called the

long run

The low per capita outputs of the DVCs are explained by

insufficient saving and investment.

Refer to the diagram. Assume that the natural rate of unemployment is 5 percent and that the economy is initially operating at point c, where the expected and actual rates of inflation are each 4 percent. If the actual rate of inflation unexpectedly rises from 4 percent to 6 percent, the economy will

move from c to d and eventually to a.

A deficit on the current account

normally causes a surplus on the capital and financial account.

Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $1.60, this nation will experience a domestic

surplus of 160 units, which it will export.

Refer to the graph. If Canadian investors buy more U.S. financial and real assets, then

the demand curve will shift right.

Capital flight is a problem facing DVCs that involves the

transfer of private savings from DVCs to IACs.