Economics 151 questions for 1st exam

What is the fundamental basis for trade among nations?

Comparative advantage

GDP is the market value

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

For any country that allows free trade,

the domestic price is equal to the world price

What is an immediate good?

A good that is used to make a final good such as paper to make a greeting card.

Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach?

...

The market for soybeans in Canada consists solely of domestic buyers of soybeans and domestic sellers of soybeans if

Canada forbids international trade in soybeans

Net exports

Foreign purchases of

What are the 4 components of GDP?

Government , consumption , investment and net exports

What does GDP exclude?

Items produced and sold illicitly, such as drugs, produced and consumer at home (gardens, mowing your own lawn)

Assume, for England, that the domestic price of wine without international trade is higher than the world price of wine. This suggests that, in the production of wine,

Other countries have a comparative advantage over England and England will import wine.

Why is real GDP a more accurate measure of an economy's production than nominal GDP?

Real GDP is not influenced by price changes, but nominal GDP is.

Market prices

The amount people are willing to pay for different goods .they reflect the value of those goods.

Investment is

The purchase of all goods that will be used in the future to produce more goods and services. Examples -capital equipment, inventories and structures. (Purchased goods)

GDP includes goods and services current produced and not goods produced in the past

True

GDP is the market value of all final goods and services produced in a country in a given time period.

True

Consumption

consists of expenditures by individuals on goods and services, such as the haircut that Maria pays for and the BMW that Maria buys (see the imports explanation in this problem as well).

The problem with the protection-as-a-bargaining-chip argument for trade restrictions is

if it fails the country faces a choice between two bad options

A tariff is a

tax on Imported goods

All transactions have a

Buyer and seller

What are some things GDP includes?

Market value of housing services,rental housing , rent, (owner-occupied)housing

Seasonal adjustment

Produces more goods and services during a particular time of year. Example Christmas

Consumption is

Spending by households on goods and services with the exception of new houses. Goods include...food clothing , srrvices...haircuts health care

Government purchases is

Spending on goods and services by local, state and federal governments

Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States?

The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government The costs of overfishing and other overly intensive uses of resources

What 2 things does GDP measure?

Total income of everyone in the economy Total expenditure on the economy's output of goods and services

A product's inclusion in one category does not necessarily imply that it is excluded from other categories.

When a good is sent across national boundaries or when a service is provided by a company in one country for a company in another country, the value of that good or service is included in the exports category for the country in which the good or service originated and in the imports category for the country that receives the good or service. For example, when Maria buys a new BMW, the value of the BMW is added to the exports category for Germany and the imports category for the United States. Furthermore, because the BMW is bought in the United States, it is also included in the consumption category, as mentioned previously. (Note: The net effect on U.S. GDP is the value added by the U.S. retailer.)

Government purchases

consist of any purchase by a state, local, or federal government. Therefore, when the Federal Aviation Administration expands the runways at Philadelphia International Airport, that is considered part of government purchases

Investment

consists of spending on capital goods, household purchases of new housing, and (net) additions to inventories. Because Rajiv uses the tools in his plumbing business, that purchase is considered investment spending.

When a country allows trade and becomes an importer of a good,

consumer surplus decreases and producer surplus increases

When a U.S. company purchases and imports electronic parts from China to use to produce MP3 players within the United States, this purchase increases the_______________component of GDP while also_____________net exports by the same amount. Therefore, the purchase of electronic parts from China causes ______________ in US GDP.

investment, decreasing, no overall change

Zelzar has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. Which groups in Zelzar are better off as a result of the new free-trade policy?

producers of steel and consumers of insense

The gross domestic product (GDP) of the United States is defined as __________________ all ______________________ ___________________ in a given period of time.

the market value of, final goods and services produced, within the United States

On the other hand, when Kevin's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China

the value of the consulting services is added to the exports category for the United States and the imports and consumption categories for China