AP Macroeconomics Unit 4 Review

According to the production possibilities curve above, the opportunity cost of increasing the production of capital goods from 150 to 200 units is

200 units of consumer goods.

We can be sure the economy is not operating at full employment if it is operating at

A and B only

Which of the following best exemplifies structural unemployment?

A surveyor was laid off when his company relocated to the Midwest.

Suppose GDP falls in the United States, but it doesn't fall in Bahrain. What is the short-run impact of this change in GDP on the value of the U.S. dollar (USD), the value of the Bahraini dinars (BHD), and U.S. net exports (based on the changing value of the U.S. dollar)? USD / BHD / Net Exports

Appreciate / Depreciate / Decrease

If there is a decrease in labor productivity, which graph would best represent the change in the short run?

B

Suppose interest rates rise in the United States, but they don't rise in other nations. As a result of this change, which of the following is true? I. The demand for the U.S. dollar will increase II. The demand for the U.S. dollar will decrease III. U.S. exports will decrease as a result of the changing value of the U.S. dollar. IV. U.S. exports will increase as a result of the changing value of the U.S. dollar.

I and III only.

A nation has a comparative advantage when: I. it produces the good at a lower opportunity cost than another nation. II. it produces the good using fewer resources than the other nation. III. it produces the good more efficiently than another nation.

I only

If there is a decrease in personal taxes, the correct sequence of events is

a decrease in taxes increases disposable income which increases consumer spending. The increase in consumer spending shifts AD to the right increasing output and price level.

The universal economic problem that must be solved by all nations is

allocating scarce resources.

If the government institutes an effective price ceiling on potato chips, then there will be a(n)

increase in quantity demanded for potato chips.

Given a normal market supply curve for blueberry bagels, if the nightly news reports that blueberry bagels help improve memory, then there is a(n)

increase in quantity supplied of blueberry bagels.

Many U.S. economists oppose using tariffs for all of the following reasons except

more jobs overall are saved

Laptop LCD TV Jamestown 1 2 Millersville 3 4 The table above reflects the number of laptops or high definition LCD televisions using the same resources for Jamestown and Millersville. The opportunity cost for Millersville to produce one LCD television is

3/4 laptop.

When the U.S. dollar appreciates against the Maltese liri, then

American tourists who travel to Malta will benefit from the new exchange rate.

Suppose the legislature of Louisville voted to impose a protective tariff on chicken. Which of the following would be true in the short-run? There will be a decrease in chicken production in Louisville. There will be a decrease in supply of chicken in Louisville. There will be an increase in chicken production by foreign nations.

II only (I think)

Which of the following will increase in a nation's current account? I. An increase in foreign aid payments to other nations II. An increase in foreign interest paid to domestic bond holders III. An increase in student aid paid by the nation's government

II only.

Suppose interest rates fall in the United States, but it doesn't fall in Bangladesh. What is the short-run impact of this change in interest rates on U.S. net exports, the value of the U.S. dollar (USD), and the value of the Bangladesh taka (BDT)?

Increase / Depreciate / Appreciate

Suppose interest rates rise in the United States, but they don't rise in other nations. What is the impact on the flow of financial capital, the value of the dollar, and U.S. net exports (based on the changing value of the dollar)? Capital Flow / Value of the U.S. dollar / Net Exports

Inflow / Appreciate / Decrease

Assume that two countries, using equal amounts of resources, can each produce any combination of capital goods and consumer goods described by the above production possibilities curve for each nation. Which country has the absolute advantage in the production of capital goods? Explain how you determined your answer. Which country has a comparative advantage in the production of consumer goods? Explain your answer using the concept of opportunity cost. (Show your work.) If the two countries specialize and trade with each other, which country will export consumer goods? Explain how you determined your answer.

a) Which country has the absolute advantage in producing capital goods. When assuming that both countries have the same input in the production of capital goods, Alpha would have the absolute advantage in the production of capital goods. The graph shows that when no consumer goods are produced, Alpha is able to produce 90 capital goods compared to Beta only producing 80 capital goods. Since both countries have the same input, it can be concluded that Alpha has the absolute advantage in the production of capital goods. b) Beta would have the comparative advantage in the production of consumer goods. Using the output method in determining the comparative advantage, I determined that Alpha has a of 1 consumer good costs 9/2 or 4.5 capita goods, while Beta has a cost of 1 capital good costs 8/9 of a capital good. This means that Beta has the comparative advantage in producing consumer goods. Alpha consumer goods 20 capital goods 90 Beta consumer goods 90 capital goods 80 To calculate comparative advantage: Alpha 90/20 = 9/2= 4.5 Beta 80/90 = 8/9 8/9 < 4.5 Therefore, Beta has the comparative advantage in the production of consumer goods. c) Based on the calculations to determine opportunity costs, Beta will export consumer goods if it can sell them at a price that is greater than 8/9 of a capital good. Alpha's opportunity cost for consumer goods is to high in order to specialize in it. Alpha is better off exporting capital goods at a price greater than 2/9 of a consumer good.

ABC Corporation argues that it needs a tariff on bread baskets so that it can grow large enough to compete with foreign producers. This is an argument for

an infant industry.

If actions of the Nepalese government caused a shortage of domestic currency, then the government fixed exchange rate would be

below the market equilibrium and dollars per rupee will tend to fall.

Greenpeace argues that we need a tariff on Brazilian products until the destruction of the rainforest is halted. This is an argument for

environmental standards.

Which of the following is included in the U.S. financial account?

foreign stock purchases by Americans.

Brian quit his job because he only wants to work on weekdays. Brian could be considered

frictionally unemployed.

Which of the following would cause the U.S. dollar (USD) to appreciate as compared to the Croatian kuna?

interest rates in the Croatia decrease

Oranges Bananas United States 4 acres 5 acres Costa Rica 3 acres. 2 acres The table above lists the number of acres it takes to produce one cargo container of oranges and one cargo container of bananas in the United States and Costa Rica. Based on this data, the United States

should specialize in oranges and trade with Costa Rica for bananas.

If the U.S. dollar price of the Danish krone increases, then

the Danish krone has appreciated.

A floating exchange rate is set by

the market forces of supply and demand.

Which of the following would increase the U.S. financial account?

the purchase of $500 of American bonds by a German investor.