Exam 4 sample quizzes (ch 17 and 18)

As shown in Exhibit 15-2, in Mexico, producing 1 additional ton of wheat costs:

1 1/2 tons of cloth

In Exhibit 15-3, Ireland's opportunity cost of producing one unit of wheat is:

3 tons of potatoes

Under the adaptive expectations hypothesis, which of the following is the effect of a shift to a more expansionary monetary policy?

In the short run, the unemployment rate will decrease, but in the long run, it will self correct to the natural rate of unemployment.

If each nation in Exhibit 15-3 specializes in producing the good for which it has a comparative advantage, then:

Ireland would produce potatoes

Which of the following statements is true?

Specialization and trade along the lines of comparative advantage allows nations to consume more than if they were to produce just for themselves.

Under the rational expectations hypothesis, which of the following is the most likely short-run effect of a move to expansionary monetary policy?

a higher general level of prices but no change in real output

As shown in Exhibit 17-2, if people behave according to rational expectations theory, an increase in the aggregate demand curve from AD1 to AD2 will cause the price level to move:

directly from 100 to 110 and then remain at 110.

A nation benefits from international trade if it:

exports goods for which it is a low opportunity cost producer

The rational expectations theory indicates that expansionary policy will:

fail to increase employment because individuals will anticipate it and take actions that will offset its impact.

As shown in Exhibit 17-2, if people behave according to adaptive expectations theory, an increase in the aggregate demand curve from AD1 to AD2 will cause the economy to move:

from E1 to E2 initially and then eventually move to E3.

Suppose Japan has a comparative advantage over Canada in the production of DVDs. This means that Japan:

has a lower opportunity cost of DVD production than does Canada

The theory of comparative advantage suggests that nations should produce a good if they:

have the lowest opportunity cost

The Phillips curve illustrates the relationship between:

inflation and unemployment

Comparative advantage is the ability of a country to produce a good at a ________ opportunity cost relative to other countries.

lower

The natural rate hypothesis argues that the economy will:

self-correct to the natural rate of unemployment

Under the natural rate hypothesis, expansionary monetary and fiscal policies can at best produce a:

short-run change in the unemployment rate

The long-run Phillips curve:

shows there is no tradeoff between unemployment and inflation.

Suppose the economy in Exhibit 17-4 is at point E1, and the Fed increases the money supply. If people have adaptive expectations, then the economy will move:

to point A in the short run and point B in the long run.

In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. If these two nations trade, Nabia should specialize in the production of:

wheat

As shown in Exhibit 15-2, the United States has a comparative advantage over Mexico in:

wheat, but not in cloth