Econ 221 Exam 2
In the economy of Ukzten in 2010, consumption was $3000, exports were $400, GDP was $5000, imports were $600, and investment was $1100. What were Ukzten's government purchases in 2010?
$1100
Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is
$150
Ryan lives in an apartment where he pays $7,000 a year in rent. Alexis lives in a house that could be rented for $14,000 a year. How much do these housing services contribute to GDP?
$21,000
In the base year, the GDP deflator is always
100
Social Security payments are indexed for inflation using
CPI
If 2004 is the base year, then the inflation rate for 2005 equals
CPI in 2005 - CPI in 2004 / CPI in 2004 x 100
The measure of the cost of a standard basket of goods and services in any period relative to the cost of the same basket of goods and services in the base year is called the
Consumer price index
The inflation rate in year 2 equals
GDP in Year 2 - GDP in Year 1/GDP deflator in Year 1 x 100
Which of the Ten Principles of Economics does welfare economics explain more fully?
Markets are usually a good way to organize economic activity
Which of the following is correct?
Nominal GDP equals real GDP in the base year
With which of the Ten Principles of Economics is the study of international trade most closely connected?
Trade can make everyone better off
When a country moves away from a free trade position and imposes a tariff on imports, it causes
a decrease in total surplus in the market.
Which of the following is a way to compute GDP?
add up the market values of all final goods and services
If an allocation of resources is efficient, then
all potential gains from trade among buyers are sellers are being realized
The primary purpose of measuring the overall level of prices in the economy is to
allow for the comparison of dollar figures from different points in time.
GDP per person tells us the income and expenditure of the
average person in the economy
On a graph, consumer surplus is represented by the area
below the demand curve and above price.
An increase in the price of dairy products produced domestically will be reflected in
both the GDP deflator and the consumer price index
According to the circular-flow diagram GDP
can be computed as the total income paid by firms or as expenditures on final goods and services
For the purpose of calculating GDP, investment is spending on
capital equipment, inventories, and structures, including household purchases of new housing
Which of the following is not included in GDP?
carrots grown in your garden and eaten by your family
Trade among nations is ultimately based on
comparative advantage
If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the
consumer does not purchase the good
The goal of the consumer price index is to measure changes in the
cost of living
In the actual economy, households
divide their income among spending, taxes, and saving
A tariff on a product makes
domestic sellers better off and domestic buyers worse off
Macroeconomists study
economy-wide phenomena
In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the largest?
education & communication
For an economy as a whole, income must equal expenditure because
every dollar of spending by some buyer is a dollar of income for some seller
Because every transaction has a buyer and a seller
every transaction contributes equally to an economy's income and to its expenditure
The world price of a simple electronic calculator is $5.00. Before Singapore allowed trade in calculators, the price of a calculator there was $4.00. Once Singapore began allowing trade in calculators with other countries, Singapore began
exporting calculators and the price of a calculator in Singapore increased to $5.00
If the world price of textiles is higher than Vietnam's domestic price of textiles without trade, then Vietnam
has a comparative advantage in textiles
A consumer's willingness to pay directly measures
how much a buyer values a good.
Welfare economics is the study of
how the allocation of resources affects economic well-being.
Grapes are considered intermediate goods
if the purchaser uses them to make wine to sell others but not if the purchaser eats them
If an economy's GDP falls, then it must be the case that the economy's
income and expenditure both fall
Gross domestic product measures
income and expenditures
For an economy as a whole,
income must equal expenditure
A tariff on a product
increases the domestic quantity supplied
The term economists use to describe a situation in which the economy's overall price level is rising is
inflation
The consumer price index is used to
monitor changes in the cost of living over time.
The GDP deflator is the ratio of
nominal GDP to real GDP multiplied by 100
The inflation rate is defined as the
percentage change in the price level from the previous period
In addition to the consumer price index, the Bureau of Labor Statistics also calculates the
producer price index
Which of the following is always measured in prices from a base-year?
real but not nominal GDP
A tax on an imported good is called a
tariff
If the CPI was 110 this year and 100 last year, then
the cost of the CPI basket of goods and services increased by 10 percent this year.
If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,
the country will be an importer of the good
What basket of goods and services is used to construct the CPI?
the goods and services that are typically bought by consumers as determined by government surveys
The percentage change in the price level from one period to another is called
the inflation rate
Efficiency is attained when
total surplus is maximized
GDP is defined as the
value of all final goods and services produced within a country in a given period of time
A seller's opportunity cost measures the
value of everything she must give up to produce a good
At the equilibrium price of a good, the good will be purchased by those buyers who
value the good more than price
In a simple circular-flow diagram, households buy goods and services with the income they get from
wages, rents and profits
The price of cotton that prevails in international markets is called the
world price of cotton
