ECONOMICS FINAL
When a good is imported, _______.
consumers gain because they pay a lower price and increase the quantity they consume
When a good is exported, _______.
consumers lose because they pay a higher price and decrease the quantity they consume
When the United States places a tariff on a good, the U.S. ______ and the U.S. ______ from the tariff.
consumers of the good lose; producers of the good gain
In the short run, which of the following actions raise the interest rate?
an increase in the demand for money
According to the graph, what is the reduction in U.S. lumber consumption as a result of the tariff?
100,000 board feet
According to the graph, how many board feet of lumber will be imported if imports are allowed into the United States?
500,000
If the nominal interest rate is 8 percent and the inflation rate is 2 percent, the real interest rate is approximately
6 percent.
According to the graph, what quantity of domestic lumber will be supplied after a tariff of $0.50 per board foot is imposed?
900,000 board feet
Choose the statement that is incorrect. A. With the tariff, part of the higher price paid to domestic producers pays the higher cost of domestic production. B. A tariff creates a social loss from the decreased quantity of the good consumed at the higher price. C. With the tariff, the increased domestic production could have been obtained at a lower cost as an import. D. A tariff creates a social loss because the domestic government loses revenue.
A tariff creates a social loss because the domestic government loses revenue.
A tariff is a
A tax on an imported good or service.
Trade between a rich and a poor country benefits
Both countries
Countries gain from specializing in producing goods in which they have a(n) __________ advantage and trading for goods in which other countries have a(n) __________ advantage.
Comparative, comparative
Goods and services produced domestically but sold to other countries are called __________.
Exports
he table shows the amounts held as the various components of M1 and M2.
M1 = 170 M2 = 1015
What are the official measures of money? Are all the measures really money? The two main official measures of money in the United States today are ______. The two main official measures of money in the United States ______ really money.
M1 and M2; are
Suppose the United States goes from a free-trade policy to a no-trade policy with other countries. Which of the following is a result of this new policy?
The U.S. no longer consumes outside its production possibilities frontier
Suppose an increase in the monetary base of $100,000 increases the quantity of money by $200,000. Calculate the money multiplier.
The money multiplier is 2
Tom took out a $6000 loan to buy a boat at an interest rate of 4 percent a year. He plans to repay the loan after 2 years. How much will he have to pay?
Tom will have to pay $6490 FV
Describe three types of short-run macroeconomic equilibrium. A macroeconomic equilibrium in which real GDP is less than potential GDP is _____ equilibrium. And one in which real GDP equals potential GDP is _____ equilibrium.
a below full-employment; a full-employment
The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources is known as:
absolute advantage
According to the theory of comparative advantage, specialization and free trade will benefit:
all trading partners who specialize in goods where they have comparative advantage
Draw an aggregate demand curve in an economy with an above full-employment equilibrium. Label it AD. Draw a point at the above full-employment equilibrium. Draw a horizontal arrow at the equilibrium price level that shows the output gap. The output gap in the graph is ______ because ______.
an inflationary gap; potential GDP is less than real GDP
The graph gives a long-run aggregate supply curve and a short-run aggregate supply curve. Technology advances and the full-employment price level remains constant. Draw the new long-run aggregate supply curve and the new short-run aggregate supply curve. Label the curves. Draw a point at the full-employment price level and the new potential GDP. An increase in potential GDP increases ______.
both long-run aggregate supply and short-run aggregate supply
To increase the money supply, the Fed may conduct
conduct open market purchases of government bonds.
The graph shows Spain's demand for oranges and the supply of oranges by growers in Spain. The world price of oranges is €1.00 a pound. Draw and label the world price line. Suppose there is free international trade. Draw a point to show the quantity of oranges bought by Spanish consumers and the price they pay. Label it 1. Draw a point to show the quantity of oranges supplied by Spanish producers and the price at which these oranges are sold. Label it 2. With free international trade, Spain produces ----- oranges than in the situation with no international trade and ----- some at the lower world price.
fewer;imports
The crowding out effect refers to
government investment crowding out private investment
If a country has a comparative advantage in the production of a good, then that country:
has a lower opportunity cost in the production of that good
A product produced in a foreign country and purchased by residents of the home country is called:
imports
The graph shows an aggregate demand curve. Draw a curve that shows the effect on aggregate demand of an increase in expected future income. Label it. An increase in expected future income _______. An increase in the expected future inflation rate _ An increase in expected future profits _______.
increases aggregate demand today; increases aggregate demand today increases aggregate demand today
An open market purchase of securities by the Fed
increases banks' reserves and decreases banks' securities
Compared to a balanced budget, when the government runs a budget deficit,
interest rates rise, and firms' private investment decreases.
When the Federal Reserve Bank increases the federal funds rate, other
interest rates rise, and short-run real GDP decreases.
When nations specialize in their comparative advantage and engage in trade:
overall standards of living increase
The net gain from international trade is _______.
positive. Consumers gain more than producers lose with imports, and producers gain more than consumers lose with exports.
The use of trade barriers to shield domestic companies from foreign competition is called __________.
protectionism
A numerical limit on the quantity of a good that can be imported is known as a(n):
quota
The cost of saving jobs through trade barriers like tariffs and quotas is:
relatively high
In the loanable funds market, an increase in wealth shifts the ________ loanable funds curve ________.
supply of; leftward
A tax imposed by a government on imported products is called a:
tariff
Which of the following is NOT one of the Fed's monetary policy tools?
the income tax rate
Draw a short-run aggregate supply curve. Label it. As we move up along the short-run aggregate supply curve, ______.
the money wage rate, the prices of other resources, and potential GDP remain constant
An increase in households' disposable income occurs. Draw a curve that shows the effect of this event. Draw a point at the new equilibrium quantity of loanable funds and the new equilibrium real interest rate. When a shortage or a surplus arises in the loanable funds market _______.
the real interest rate is pulled to the new equilibrium level
Draw the long-run aggregate supply curve when potential GDP is $17.5 trillion. Label it. As we move up along the long-run aggregate supply curve, ______.
the real wage rate remains constant
If an economy experiences a decrease in the money supply, short-run unemployment
increases, and short-run output decreases.
If potential GDP increases, what happens to aggregate supply? When potential GDP increases, ______.
long-run aggregate supply and short-run aggregate supply increase. The LAS and the SAS curve shift rightward
The graph shows the demand for money curve and the supply of money curve. The Fed decreases the quantity of real money supplied to $2.0 trillion. Draw a new MS curve that shows the effect of the Fed's action. Label it. Draw a point at the new equilibrium quantity of money and interest rate. Before the Fed decreases the quantity of money, the equilibrium interest rate is 66 percent a year. After the Fed decreases the quantity of money, at an interest rate of 6 percent a year, people want to hold _______ money than the quantity supplied, so they _______ bonds. The price of a bond _______ and the interest rate _______.
more; sell falls; rises
Suppose that the world price of tomatoes is 60 cents a pound, the United States does not trade internationally, and the equilibrium price of tomatoes in the United States is 40 cents a pound. The United States then begins to trade internationally. The price of tomatoes in the United States ______. U.S. consumers buy ______ tomatoes. The United States ______ tomatoe ______ gain from international trade in tomatoes. ______ lose from international trade in tomatoes.
rises; fewer tomatoes and U.S. firms produce more; exports Your answer is correct. The United States exports tomatoes. U.S. producers; U.S. consumers