Econ exam 2

Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 1 illustrates the impact of the quota. 12) Refer to Figure 1. What is the value of the deadweight loss as a result of the quota?

$5.25 million

31) The CPI in 1990 was 131, and the CPI in 2010 was 218. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2010?

$66,565

29) Monthly expenditures for a family of 4 in 2012 averaged $1,400. In 2013, the cost of the same purchases was $1,500. If 2012 is the base year, what was the CPI in 2013?

107

38) Refer to Table 5. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals

$1,600

A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2008 and 2013 are shown in the table above. 20) Refer to Table 2. What is real GDP in 2013, using 2008 as the base year?

$10,275

A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2008 and 2013 are shown in the table above. 21) Refer to Table 2. What is real GDP in 2013, using 2013 as the base year?

$11,790

9) Consumption spending is $4.5 billion, gross domestic investment is $3 billion, and government expenditures are $2 billion. If GDP is $14 billion, which of the following could be true regarding exports and imports in the economy?

Exports are $15 billion, and imports are $10.5 billion.

32) If your nominal wage rises more slowly than the price level, we can say your real wage has ________ and the purchasing power of a dollar has ________.

Fallen; fallen

34) Marla is an architect who is designing a home for Chuck. Chuck is paying Marla $150 per hour to design his new home. When Chuck and Marla get married, Marla continues to work on designing the home, but she no longer charges Chuck for her work. As a result, GDP ________ because ________.

Falls; Marla's architectural design services are no longer bought by Chuck once they're married

26) A student who just graduated from college but has not found a job would most likely be

Frictionally unemployed.

5) Suppose that homemakers are included as employed in the labor force statistics, rather than being counted

Increase the measured labor force participation rate.

6) If the U.S. government implements a tariff on Chinese tire imports, the price of Chinese-made tires will ________, the quantity demanded will ________, and consumer surplus will ________.

Increase; decrease; decrease

7) Legalizing all forms of illegal activities

Increases GDP and reduces the size of the underground economy.

7) A final good is one that

Is purchased by its final user.

13) Which of the following transactions would take place in the "underground economy"?

John makes chain-link belts and necklaces and sells them at a local flea market for cash to avoid paying taxes.

17) In which case would kitchen cabinets be directly counted in GDP in 2014?

Kitchen cabinets purchased from Home Depot in 2014 to be installed in a house built in 1997

28) The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is

Vertical

34) If an economy experiences deflation, the real interest rate

Will be greater than the nominal interest rate.

2) If Norwegian workers are more productive than Albanian workers, then trade between Norway and Albania

Will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

In the first half of 2011, automobile sales in the United States were lower than they were in the first half of 2010. The decrease in auto sales impacts GDP because new automobiles are counted as ________ when purchased by households and ________ when purchased by businesses.

consumption; investment

If cyclical unemployment is eliminated in the economy, then

the economy is considered to be at full employment.

A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2008 and 2013 are shown in the table above. 22) Refer to Table 2. What is nominal GDP in 2013 when 2008 is the base year?

$11,790

Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 1 illustrates the impact of the quota. 10) Refer to Figure 1. What is the value of domestic producer surplus after the imposition of a quota?

$15.75 million

Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 1 illustrates the impact of the quota. 11) Refer to Figure 1. What is the value of revenue (not gain) to foreign producers who are granted permission to sell in the U.S. market when there is a quota?

$44 million

25) Refer to Table 3. Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals

$6,400.

25) Assume the market basket for the consumer price index has two products — bread and milk — with the following values in 2006 and 2013 for price and quantity: The Consumer Price Index for 2013 equals Table 1 2006 (Base Year) 2013 Product Quantity Price Price Milk 50 $1.20 $1.50 Bread 100 1.00 1.10

116

30) If, between 2003 and 2013, the economy's real GDP grew from $20 billion to $40 billion, what was the average annual growth rate in the economy?

7%

27) If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2013, we would say that in the year 2013, the average American could buy ________ times as many goods and services as the average American in 1950.

8

13) Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest. If the inflation rate was 4%, what was the real interest rate you paid?

8 percent

35) If you invest $10,000 in a bond that earns 8% interest per year, how many years will it take to double your money?

8years and 9 months

8) An example of a final good would be

A soy latte sold by Starbucks to a student.

6) All of the following are sources of comparative advantage except

A strong foreign currency exchange rate.

1) A tax imposed by a government on imports of a good into a country is called

A tariff

24) Assume that Australia has a comparative advantage in producing surfboards and New Zealand imports surfboards from Australia. We can conclude that

Australia has a lower opportunity cost of producing surfboards relative to New Zealand.

Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. 35) Refer to Table 4. Use the table above to select the statement that accurately interprets the data in the table.

Bill has an absolute advantage in picking berries and Rob has an absolute advantage in catching fish.

19) The labor force is the sum of

Employed workers and unemployed workers.

11) GDP is not a perfect measure of well-being because

GDP is not adjusted for population

12) "Household production" refers to

Goods and services people produce for themselves.

31) To examine how the total production of an economy has changed over time, it would be better to examine

Real GDP

15) If prices are rising on average, then

Real GDP will be greater than nominal GDP in the years before the base year.

39) In periods when prices are falling, on average,

Real GDP will grow faster than nominal GDP.

17) Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will

Remain constant.

Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. 36) Refer to Table 4. Use the table above to select the statement that accurately interprets the data in the table.

Rob has a greater opportunity cost than Bill for picking berries.

5) Which of the following is common to both tariffs and quotas?

Tariffs and quotas are both designed to reduce foreign competition faced by domestic firms.

23) In the 1980s, Japan agreed to limit the quantity of automobiles it would export to the United States. Why did the Japanese government agree to this trade restriction?

The Japanese government feared that the alternative would be a tariff or quota on imports of Japanese automobiles imposed by the U.S. government

30) If the CPI rises from 206.7 to 212.7 between two consecutive years, by how much has the cost of living changed between these two years?

The cost of living has increased by 2.9%.

23) When an economy is at its natural rate of unemployment, which of the following will be true?

The unemployment rate will be greater than 0%.

33) To calculate GDP using the value-added method, one would add up

The value added by each firm involved in the production of final goods and services

36) According to the "Rule of 70," it will take 4 years for real GDP per capita to double when the growth rate of real GDP per capita is

17.5 percent

Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 1 illustrates the impact of the quota. 9) Refer to Figure 1. With a quota in place, what is the quantity supplied by domestic producers?

18 million pounds

27) Refer to Table 2. Consider the following values of the consumer price index for 1996, 1997, and 1998: The inflation rate for 1997 was equal to

2.5 percent

Refer to Table 1. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The base year used in calculating real GDP is Year Nominal GDP Real GDP 2008 $7,400 $7,537 2009 $7,813 $7,813 2010 $8,301 $8,165 2011 $8,760 $8,516

2009

33) If you want to earn a real interest rate of 3% on money you lend, and you expect that inflation will be 2%, what nominal rate of interest will you charge?

5%

24) Which of the following would increase the unemployment rate?

An increase in unemployment insurance payments

16) Which of the following is not a durable good?

Clothing

Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. 37) Refer to Table 4. Use the table above to select the statement that accurately interprets the data in the table.

Bill has a comparative advantage in picking berries.

18) Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?

Discouraged workers

16) The best measure of the income households actually have available to spend is

Disposable personal income.

4) Autarky is a situation in which a country

Does not trade with other countries

29) The purchase by a foreign government of an airplane produced in the United States is included in U.S.

Net exports.

3) If the ________ cost of production for two goods is different between two countries then mutually beneficial trade is possible.

Opportunity

40) If real GDP increases we know for sure that

Output has risen.

22) Full employment is not considered to be zero unemployment, because

People do not find jobs instantaneously

18) Economists believe the most persuasive argument for protectionism is to

Protect infant industries.

26) A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket

Rose 60% from the cost of the market basket in the base year.

14) Sarah is a full-time student who is not looking for work. What kind of unemployment is Sarah experiencing?

Sarah is not experiencing unemployment of any kind, because she is not currently part of the labor force.

28) In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. All of the following are reasons for this except

Some countries have more resources than other countries.

Which of the following describes the national security argument for protectionism?

Some goods should be insulated from foreign competition to ensure an adequate supply of these goods in

15) If Sweden exports cell phones to Denmark and Denmark exports butter to Sweden, which of the following would explain this pattern of trade?

Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter.

19) You agree to lend $1,000 for one year at a nominal interest rate of 10%. You anticipate that inflation will be 4% over that year. If inflation is instead 3% over that year, which of the following is true?

The person who borrowed the $1,000 will be worse off as a result of the unanticipated decrease in inflation.

14) Which of the following could cause nominal GDP to decrease, but real GDP to increase?

The price level falls and the quantity of final goods and services produced rises.

8) If labor productivity growth slows down in a country, this means that the growth rate in ________ has declined.

The quantity of goods or services that can be produced by one hour of work

32) When prices are rising, which of the following will be true?

The real interest rate will be lower than the nominal interest rate.

10) Gross domestic product understates the total production of final goods and services because of the omission of

The underground economy

21) During the month of May, 10 million workers moved from being classified as "unemployed" to being classified as "employed." As a result,

The unemployment rate fell.

20) Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job,

The unemployment rate increased.