1. The ratio at which two nations will exchange two goods is:
(comparative advantage/terms of trade/absolute advantage)
2. The dollar appreciates if the U.S. PL (increases/decreases),
if U.S. interest rates (increase/decrease), if U.S. growth rate
(increases/decreases), and if there is a(an) (increase/decrease)
in taste for U.S. products.
3. The dollar appreciates if it takes (more/fewer) pennies to buy a foreign currency.
4. If the U.S. increases tariffs on most foreign goods, prices of domestic goods
will (increase/decrease) and choices will be (fewer/more numerous).
5. An increase in demand for the dollar (appreciates/depreciates) the dollar and
makes our exports (cheaper/more expensive).
6. The Smoot-Hawley Tariff of 1930 greatly (increased/decreased) tariffs.
7. The Reciprocal Trade Agreement of 1934 greatly (reduced/increased) trade
barriers.
8. American exports average about (5%/12%/25%/50%) of GDP.
9. If the dollar price of the peso increases then the dollar
(appreciates/depreciates) and their exports to the U.S. would (increase/decrease).
60
Mexico’s PPF (tons)
U.S. PPF (tons)
90
Avocados
Avocados
Product A B C D E Product A B C D E
Avocados 0 20 24 40 60 Avocados 0 30 33 60 90
Soybeans 15 10
9 5 0 Soybeans 30 20 19 10 0
DCC: 1S costs ___A
DCC: 1S costs ___A
4
3
1/3 S costs 1A
___
___
¼ S costs 1A
0
30
0Soybeans
15
Terms of Trade: 1S = ___
3.5 A
Soybeans
10. In Mexico, the opportunity cost of 1S is (1/3 or 4 or 5 ) avocados.
11. If these 2 nations specialize, Mexico will produce (avocados/soybeans) & the
U.S. will produce (avocados/soybeans).
12. Mexico has an absolute disadvantage in
(avocados only/soybeans only/both avocados and soybeans).
13. If both produced at combination “C” prior to specialization, what would be the
gains after trade? (0/3/2/10) tons of avocados and (1/3/2/10) tons of soybeans.
14. The terms of trade would be 1 ton of soybeans for (1/3/4/3.5) tons of avocados.
Djibouti
Caviar 10 hours
Wheat 5 hours
DCC: Djibouti
2 W
1C costs ___
___C costs 1W
½
Canada
Caviar 18 hours
Wheat 6 hours
DCC: Canada
1C costs ___
3 W
1/3
___C costs 1W
Terms of Trade: 1C = ___
2.5 W
15. (Djibouti/Canada) has an absolute advantage in both commodities.
16. (Djibouti/Canada) has a comparative advantage in producing wheat.
17. (Djibouti/Canada) has an absolute disadvantage in both commodities.
18. Djibouti/Canada) has a comparative advantage in caviar.
19. Trade can occur between the two when 1 caviar is exchanged for(1/2.5/3) wheat.
Ig
Government
20. The 4 components of GDP are Consumption
____________, ____________,
_______________,
Net exports
and _______________.
21. (Intermediate/Final) goods are components of final goods.
tools
machinery
22. What 3 things are included in Gross investment? ____________,
___________,
inventories
and change in ___________.
23. The smallest component of GDP is (C/Ig/G/Xn) and the largest component of
GDP is (C/Ig/G/Xn).
No productive work
24. Why do transfer payments (welfare) not count in GDP? ___________________.
25. If a new car is produced in 2005 but not sold, it is counted as
(investment/consumption/disinvestment). If it is sold in 2006 to a Richland student,
it is counted as (investment/consumption/disinvestment).
26. A person who quits their job to look for a better one is classified as
(cyclically/frictionally) unemployed.
27. If there is substantial unemployment [10%], (potential/actual) GDP exceeds
(potential/actual) GDP.
28. Okun’s Law says that for every 1% of real unemployment [cyclical], there is a
(1%/ 2%/3.5%) gap.
29. Suppose a person’s nominal income rises from $10,000 to $11,000 and the CPI
rises from 100 to 103, the person’s real income will rise by (4%/7%/10%) percent.
3.4%
30. If the CPI increases from 116 to 120, the economy has experienced inflation of _____.
[4/116x100=?]
31. Using the “rule of 70”, how long would it take for inflation to double if the annual
9 yrs.
rate averages 8%? __
32. Dissaving occurs where (income/consumption) exceeds (income/consumption).
33. The (MPC/MPS/APC/APS) indicates the percent of total income which will be
consumed.
34. The greater is the MPC, the (smaller/greater) is the MPS, which results in a
(larger/smaller) multiplier.
$100
35. The APC is “one” at point [letter]: (J/H/G/A).
36. Consumption will be equal to income (GDP) at
(J/H/G).
37. A shift from AE2 to AE3 would be caused by a(an) (appreciation/depreciation) of
the dollar.
38. If there is a shift from “J” to “H”, the simple multiplier is: (2/ 3/ 4/ 5).
39. If the FE GDP is OL & we are at AE2 then there is:
a. recessionary gap b. inflationary gap c. no gap as the economy is in FE at “E”
40. If the FE GDP is OL & we are at AE1, the (recessionary/inflationary) gap is: (AB/BC).
Bonus: Suppose that autonomous consumption is
$800 & that the MPC is 0.9. DI increases by $1,400,
so consumption spending will increase by:
(a) $1,400 (b) $2,060
(c) $1,200
(d) $1,260
(e) $800
[$800 autonomous consumption+90% of $1,400=$360; so $800+$360=$1,260]
$100
41. If the FE GDP is OL & we are at AE3, the (recessionary/inflationary) gap is: (AB/BC).
42. The equilibrium level of GDP (actual GDP) at AE3 is: ($1,000/$1,600/$2,200).
43. If FE is OL & we are at AE1, best fiscal policy would be to (incr/decr) “G” &/or (incr/decr) T.
44. If FE is OL & we are at AE3, best fiscal policy would be to (incr/decr) “G” &/or (incr/decr) T.
45. At income level OK, the volume of saving is: ($300/$700/$1,000).
46. The economy is “dissaving” at GDP level:
($200/$400/$600/$800).
47. A shift from “J” to “H” would result in a MPC of: (IP/QK or HK/OK or HI/QK).
48. A shift from “J” to “H” would result in a MPS of: (HK/OK or IP/QK or HI/QK).
49. It is assumed that Ig, Xn, & “G” (all injections):
A. vary directly with GDP B. vary inversely with GDP C. are independent of the level of GDP
50. Aggregate saving will be zero where GDP is: ($200/$400/$600/$800/$1,000).
51. If the FE GDP is OL & we are at AE1, a (recess/inflat) gap, we can conclude that at the
equilibrium point [actual GDP], saving (is less than/equals/exceeds) planned investment,
but at the FE GDP[$1,600], saving (is less than/equals/exceeds) planned investment by (HI/GF).
52. If gross investment is AE1, the equilibrium GDP is: ($200/$700/$1,000).
53. At AE1, savings total ($200/$300/$700/$1,000) & consumption totals: ($300/$500/$700).
54. At AE1($1,000 GDP), the G decreases both “G” & “T” by $300 billion to balance the
budget. With a M of 5, the GDP (increases/decreases) to ($700/$1,000/$1,300/$1,800).
55. At AE1($1,000 GDP), the G spends $400 billion & increases taxes by $400 billion to
balance the budget. With a M of 2, the GDP (incr/decr) to ($600/$1,000/$1,400/$1,800).
56. If the economy is experiencing a recession, then appropriate fiscal policy would
be to (increase/decrease) spending and/or (increase/decrease) taxes.
57. If the MPC is .8, G could eliminate an inflationary spending gap of $8 billion by
increasing taxes by ($8/$10/$12) billion, or decreasing G by ($8/$10/$12) billion.
AD/AS and Classical v. Keynesian
58. The AD curve shows the amount of (nominal/real) domestic outpu t[AQD] which will
be purchased at each PL.
59. The “interest rate effect” suggests an increase in the PL will (decrease/increase)
I.R., (decrease/increase) “C”, Ig, and Xn, and (decrease/increase) (AQD/AD).
60. If the national incomes of Japan, Canada, and Mexico were to rise, our AD curve
would shift (left/right).
61. An improvement in productivity will shift the (AD/AS) curve to the (left/right).
62. Three stabilizing forces in Classical economics are flexible _______,
prices _______,
wages
and _________
interest ________.
rates
63. Keynes (agreed/disagreed) with the Classicals about Say’s Law that “savings=Ig.”
64. The Keynesians viewed the AS curve as being basically (vertical/horizontal).
65. In Classical theory, a decline in AD will (increase/reduce/not affect) price level.
66. As regards the foreign purchase effect, an increase in U.S. price level will cause
a(n) (increase/decrease) in American exports and a(n) (increase/decrease) in
American imports & therefore cause a(an) (increase/decrease) in (AD/AQD).
67. A change in (price level/government spending) causes a change in AQD.
A change in (price level/production) causes a change in AQS.
68. An increase in AQD would result from a(n) (increase/decrease) in price level.
An increase in AQS would result from a(n) (increase/decrease) in price level.
69. The 3 functions (roles) of money are medium
_______ of exchange
________, unit of _______,
account
value
and store of ________.
70. M1 = __________+
currency _________
demand deposits.
Small time
71. M2 = M1 + MMAs + savings deposits + ______
_____deposits
________ under $100,000.
Large ____
time ___________
deposits
72. M3 = M2 + _____
over $100,000.
73. The transaction demand for money is related to money functioning as a
(store of value/medium of exchange).
74. The asset demand for money is related to money functioning as a
(store of value/medium of exchange).
75. In our economy the money supply is controlled by the (President/Congress/Fed).
76. Assume your economics instructor deposits $100,000 in the Duck Bank. If no ER
exists at the time this deposit is made & the RR is 25%, the Duck Bank can
increase the MS (its loans) by a maximum of ($65,000/$75,000/$150,000).
77. If you deposit $100 in the Thunderduck Bank which has a RR of 20%, the bank
will have ($60/$80/$100) of additional ER.
78. Suppose Thunderduck Bank has $100,000 DD & TR of $50,000. If the RR is 25%,
the banking system can expand the MS [PMC] by a maximum amount of
($50,000/$100,000/$150,000).
79. If borrowers take a portion of their loans as currency rather than DD, the
maximum amount by which the commercial banking system can increase the MS
by lending will (increase/decrease).
80. The (discount rate/Federal Funds Rate/prime rate) is an overnight loan from one
bank to another bank.
81. Assume the Duck Bank has no ER & that the RR is 20%. If this bank sells a bond
to the Fed for $1,000, it can expand its loans by a maximum of ($900/$1,000/$2,000).
82. The Fed regulates the MS mainly by (buying & selling bonds/altering the RR).
83. A decrease in the RR [say, from 20% to 10%] tends to (increase/decrease) the MS by
(increasing/decreasing) the ER and (increasing/decreasing) the monetary multiplier.
84. An easy money policy cause-effect chain would go like this: (buying/selling) bonds
would (decrease/increase) the MS which (raises/lowers) the interest rate, which
causes a(n) (decrease/increase) in investment spending, consumption, and net
Xn, which (increases/decreases) GDP. The dollar has (appreciated/depreciated).
85. A tight money policy cause-effect chain would go like this: ( buying/selling) bonds
would (decrease/increase) the MS which (raises/lowers) the interest rate, which
causes a(n) (decrease/increase) in investment spending, consumption, and Xn,
which (increases/decreases) GDP. The dollar has (appreciated/depreciated).
86. If a certain household earns and spends $30,000 per year, and on the average,
holds a money balance of $10,000, then the velocity of money for this household
is (3/4/5/6).
87. If a bank has DD of $100,000, TR of $15,000 & the RR is 10%, what is the possible
PMC? $_________
$50,000
88. Coins in your pocket is (M1/M2/both).
89. If AD is AD3 & the Fed wants to get to FE GDP at AD2 [Yf], they should
(increase/decrease) the MS from ($120/$140) to ($100/$120).
90. If the MS is MS1 and the Fed wants to get to FE GDP [Yf], they should
(increase/decrease) the MS from ($100/$120) to ($120/$140).
91. (Buying/Selling) bonds would shift the MS curve from MS3 to MS1
92. The formula for the equation of exchange is (AE=GDP/MV=PQ/MP=VQ).
93. The monetarists are politically (conservative/liberal), believe in
(“rules of law”/discretion of men) on controlling the MS, believe that the capitalist
economy is basically (stable/unstable), that V is basically (stable/unstable), that
there should be an (activist/non-activist) role for monetary policy, and they also
believe the “G” is like the (“fool in the shower”/student driver) & the Fed is like the
(“fool in the shower”/student driver).
94. According to Keynesians, the money demand curve is relatively (steep/flat)
and the investment-demand curve is relatively (steep/flat).
95. According to the monetarists, the money demand curve is relatively (steep/flat)
and the investment-demand curve is relatively (steep/flat).
96. According to Keynesians, V varies (directly/inversely) with the interest rate and
(directly/inversely) with the money supply.
97. The traditional (old) PC suggests a tradeoff between unemployment & (Y/inflation).
98. According to the natural rate theorists, when the actual rate of inflation is greater
than the expected rate, firms will experience (rising/less) profits & thus
(increase/decrease) their employment.
99. Adaptive expectations economists believe there (is a/is no) short run tradeoff but
there (is/is no) long run tradeoff between inflation and unemployment.
100. Rational Expectations economists believe there (is/is no) short run tradeoff &
there also (is/is no) long run tradeoff between inflation and unemployment.
101. “Reaganomics” advocated an (increase/decrease) in government regulations,
a(an) (increase/decrease) in the growth of government, and a(an) (increase/decrease)
in corporate & personal income taxes.
102. The ultimate goal of Reaganomics was to shift the (AD/AS) curve to the (right/left).
103. Rational Expectations economists (recommend/do not recommend) discretionary
monetary policy.
104. The notion that the federal budget should stabilize the economy and not worry
about the debt best describes
(cyclically balanced budget/functional finance/ annually balanced budget).
105. An annually balanced budget amendment would (stabilize/destabilize) a recession.
106. Most of the National Debt is owned by (foreigners/American citizens, therefore it
(can/can not) also be called a public credit.
107. Because of government borrowing to finance the debt and the resulting higher
interest rates, the stock of capital [“national factory”] inherited by future
generations is likely to be (smaller/larger).
A
___2.
What is given up when moving from "C" to "D"?
a. capital goods
b. consumer goods
C
___3.
Which will NOT cause a "Change in Aggregate Demand" ?
a. increase in consumption
c. change in the price level
Capital Goods
C
___1.
At what point would there be the most economic growth
in the future if a country were producing there now?
C
B
D
A
E
Consumer Goods
D
b. decrease in “G” spending on the military
d. depreciation of the dollar
B
___4.
A depreciation of the dollar would shift the AD curve to the?
a. left
b. right
A
___5.
A depreciation of the dollar would shift the AS curve to the:
a. left
b. right
D
___6.
The aggregate supply curve would shift to the right if:
a. consumption increased
b. businesses taxes increased
c. price level increased
d. productivity increased
C
___7.
An increase in AD could be caused by:
a. appreciation of the dollar.
b. businesses taxes increased
c. increase in incomes of our trading partners d. productivity decreased
C Unemployment is 18%. Nominal GDP is $300 billion. Real (cyclical) unemployment is
___8.
___%, & the GDP output gap being forgone is ____.
a. 10%; $24 billion
b. 24%; $48 billion
c. 12%; $72 billion
D If our price level is increasing faster than that of Djibouti, the Djiboutian franc will
___9.
(appreciate/depreciate) and their exports to the U.S. will (increase/decrease).
a. appreciate/increase b. depreciate/decrease
c. depreciate/increase d. appreciate/decrease
B
___10.
If the dollar price of the euro increases, then the dollar
(appreciates/depreciates) and European exports to the U.S. will (increase/decrease).
a. appreciate/increase b. depreciate/decrease
c. depreciate/increase d. appreciate/decrease
B
___11.
Monetary policy (change the RR, DR, & buying/selling bonds) during a depression
would be more effective if you?
A. raise, raise, sell
B. lower, lower, buy
B
___l2.
During a recession, an easy money policy means (buy/sell) bonds, which (incr/decr)
the MS, which (incr/decr) the I.R., which (incr/decr) investment, which (incr/decr) GDP.
a. sell/incr/decr/incr/incr b. buy/incr/decr/incr/incr
B
___l3.
RR is 20%; Fed buys $50 million of bonds from the Public. The MS is increased
by _____? Possible money creation in the banking system is ________?
a. $40 mil, $200 mil b. $50 mil, $200 mil c. $50 mil, $250 mil
B
___l4.
Suppose the Lynch Bank has ER of $20,000 and DD of $100,000. If the RR is 40%
what is the TR?
a. $40,000 b. $60,000 c. $80,000 d. $120,000
B
___l5.
Assume the RR is 20% & the Lynch Bank borrows $100,000 from the Fed. As a result
this one bank's ER are increased by _____? And PMC in the banking system is _____?
a. $80,000, $500,000 b. $100,000, $500,000 c. $80,000, $400,000
B
___l6.
If nominal GDP is $100 billion & unemployment is 12%, then the GDP output gap
being foregone is: a. $6 billion b. $12 billion c. $18 billion
C
___l7.
A decrease in price level will cause:
a. increase in AD b. decrease in AS c. decease in AQS D. decrease in AQD
C
___l8.
The real money-balance effect indicates that a higher price level will (increase/decrease)
the real value of assets and cause a(n) (increase/decrease) in consumption which would
a(n) (increase/decrease) in AD and GDP.
a. (increase/increase/increase) b. decrease/increase/increase c. decrease/decrease/decrease
A
___l9.
Which of the following will cause an increase in AQS?
a. increase in PL
b. decrease in resource cost
c. decrease in business taxes
B
___20.
Which of the following will not shift the aggregate supply curve?
a. depreciation of the dollar b. increase in the PL
Apples
Plums
B
20
40
C
40
20
Spain’s PPF
Apples
60
A
0
60
0 Plums 60
D
60
0
DCC:Spain
1P = __
1 A
Terms of Trade
1Plum = _______
2.5 Apples
China
Apples
Plums
60
A
0
15
B
C
20 40
10 5
D
60
0
DCC: China
1P = __
4 A
___
1/4 P=1A
China’s PPF
Apples
Spain
c. increase in resource cost
0 P 15
21. In China, the opportunity of cost of 1 ton of plums is (1/3/4/5) tons of apples.
22. Spain has an absolute advantage in (apples/plums).
23. If trade occurs, Spain will export (apples/plums) & China will export (apples/plums).
24. For Spain, the opportunity cost of one ton of plums is (1/3/4/2.5) tons of apples.
25. Prior to specialization and trade, China chose “C” and Spain chose “B”. Now each
specializes according to comparative advantage. The resulting gains from trade will be
(0/10/15/25) tons of apples and (0/20/15/25) tons of plums.
26. If interest rates are increasing faster in the U.S. compared to those in Bangladesh, the
dollar will (appreciate/depreciate) and our exports to Bangladesh will (increase/decrease).
27. If our price level is decreasing compared to Mexico, the dollar will
(appreciate/depreciate) and our imports from Mexico will (increase/decrease).
28. If Russia decides to buy 50 million Fuzzy Wuzzies from the U.S., the Russian ruble
would (appreciate/depreciate) and our imports from Russia would (increase/decrease).
29. If the Djiboutian Franc price of the dollar increases, then the Djiboutian Franc has
(appreciated/depreciated) and Djibouti’s exports to the U.S. should (increase/decrease).
30. If our growth rate (income) is increasing faster than that of Mexico, the Mexican peso
will (appreciate/depreciate) and their exports to the U.S. will (increase/decrease).
C The monetarists believe the money demand curve is (more flat/more vertical), and the
___1.
investment demand curve is (more flat/more vertical).
a. more vertical; more vertical b. more flat; more flat
c. more vertical; more flat d. more flat; more vertical
C A Jag produced in 2004 but not sold to your economics teacher until 2005 is counted as:
___2.
a. consumption b. investment c. disinvestment
B “Supply creates demand” was a motto of the:
___3.
a. Keynesians b. Classicals c. Democrats
___4.
B “Don’t do something, just stand there” is the recession advice by the:
a. Keynesians
b. Classicals
c. Democrats
B “The economy has fallen and can’t get up,” might have been stated by a
___5.
a. Republican
b. Keynesian
c. Classicals
___6.
A Advocates of monetary policy and particularly fiscal policy would be the:
a. Keynesians
b. Rational Expectations
c. Classicals
d. Monetarists
B According to the Keynesians, velocity varies (directly/inversely) with the interest rate and
___7.
(directly/inversely) with the money supply. a. inversely/directly b. directly/inversely
C A decrease in the RR (increases/decreases) the MS, (increases/decreases) the
___8.
excess reserves, and (increases/decreases) the multiplier.
a. decreases/decreases/decreases b. decreases/increases/increases
c. increases/increases/increases
[Chg in AD is caused by “C+Ig+G+Xn”; Chg in AQD is caused by a PL change (inverse)]
D
___9.
Which of the following will cause an "Increase in AD"?
a. decrease in price level b. increase in price level c. decrease in consumption d. increase in G
A
___10.
Which of the following will cause an "Increase in AQD"?
a. decrease in price level b. increase in price level c. decrease in consumption d. increase in G
[Change in AS is caused by “REP”; Change in AQS caused by a PL change (direct)]
C
___11.
Which of the following will cause a "decrease in AS"?
a. decrease in PL b. increase in PL c. increase in business regulations d. increase in productivity
A
___12.
Which of the following will cause a "decrease in AQS"?
a. decrease in PL b. increase in PL c. increase in business regulations d. increase in productivity
110,000
13. A bank has ER of $10,000, DD of $200,000 & RR of 50%. TR are $ _________.
14. There are no ER. Josh Howard deposits $100,000. With a RR of 25%, how
75,000 Potential money creation in the banking system
much can this bank loan out $________
400,000
300,000
is $ ___________.
Potential TMS is $__________.
15. Assume the RR is 10% & the Lynch Bank borrows $1 from the Fed. This bank's ER
$1 Possible money creation in the banking system is $_______.
10.00
are increased by _____.
16. RR is 25%. Econ Bank borrows $50,000 from the Fed. This bank's ER are
increased by $ 50,000
______ Possible money creation in the banking system is $ _________.
200,000
17. RR is 10%. Fed buys $10 million of bonds from the Public. The MS is increased
by $___
10 million. ER are increased by $__
9 million. Possible money creation in the
90 million. Potential TMS is $_____
100 million.
banking system is $___
18. RR is 50%. Fed buys $100 million of bonds from the Public. The MS is increased
by $____
100 million. ER are increased by $___
50 million. Possible money creation in the
100 million. Potential TMS is $_____
200 million.
banking system is $____
19. RR is 25%. Fed buys $50 million of bonds from the Public. The MS is increased
50 million. ER are increased by $______
37.50 million. Possible money creation in the
by $___
150 million. Potential TMS is $______
banking system is $_____
200 million.
20. If the dollar price of the Thailand baht decreases, the dollar has (appreciated/depreciated)
and Thailand's exports to the U.S. (our imports) would (increase/decrease).
21. If the U.S. price level is increasing faster than that of Mexico, the peso will
(appreciate/depreciate) and Mexico’s exports to the U.S. would (increase/decrease).
50
1 TVs
U.S.’s DCC: 1C = ___
4 TVs
Japan’s DCC: 1C = ___
____
1/4 C = 1 TV
0
U.S.
TVs
TVs
40
Computers
U.S.
50
Japan
Japan
0 Computers 10
22. In the above example, (Japan/the U.S.) has a comparative advantage in
computers and (Japan/the U.S.) has a comparative advantage in TVs.
23. In Japan, the opportunity cost of one computer is (2/3/4/5/6) TVs.
24. In the U.S., the opportunity cost of one computer is (1/2/4/7/8) TVs.
25. (Japan/The U.S.) has an absolute advantage in both computers & TVs.
Country
Swaziland
Zaire
Fish
5 hours
10 hours
Corn
20 hours
80 hours
4 F
Swaziland’s DCC: 1C = __
1/4 C = 1 F
___
8 F
Zaire’s DCC: 1C = __
___
1/8 C = 1 F
26. Swaiziland has an absolute (advantage/disadvantage)
in (fish/corn/both fish & corn).
27. (Swaiziland/Zaire) has a comparative advantage in
fish and (Swaiziland/Zaire) has a comparative advantage in corn.
28. In Swaiziland, the opportunity cost of one corn is (2/4/6/8) fish.
29. In Zaire, the opportunity cost of one corn is (2/4/6/8) fish.
30. If nominal GDP is $200 billion & unemployment is 17%, then cyclical
11 %; the per cent gap is 22
unemployment is ___
___ %; and the GDP output gap
44 billion. [11 x 2% = ___
being foregone is $___
22 %]
We are going to turn inputs into outputs.
In 20 hours, Swazi can produce an output of 1 corn or 4 fish.
In 80 hours, Zaire can produce an output of 1 corn or 8 fish.
K
J
AE[C+Ig]
F
G
S AE[C+Ig2]
AE[C+Ig1]
Consumption
I
H
E
0 A B
C
D
DI
1. At income level “OD”, the volume of consumption is _____.
IK
2. At income level “OD”, the volume of saving is _______.
3. If Ig is Ig2, then “equilibrium GDP” is __________.
OD
4. If Ig increases from Ig1 to Ig2, then equilibrium GDP increases by ______.
CD
5. If Ig increases from Ig1 to Ig2, the “MPC” is equal to __________.
HI/CD
6. As we move from income level OB to OC, the “MPS” is _________.
FG/BC
7. The economy is “dissaving” at income level ________.
0A
8. Consumption will be equal to income at income level _________.
OB
9. Which of the following will cause an “increase in AD” ?
a. decr in PL b. incr in PL
c. decrease in consumption d. increase in G
10. Which of the following will cause an “increase in AQD”?
a. decr in PL b. incr in PL c. decrease in investment d. increase in Xn
11. Which of the following will cause a “decrease in AS”?
a. decr in PL b. incr in PL c. decrease in productivity d. decrease in G
12. Which of the following will cause a “decrease in AQS”?
a. decr in PL b. incr in PL c. decrease in productivity d. decrease in Xn
263,000
13. Suppose a bank has ER of $13,000, DD of $500,000 & RR of 50%. TR are $______.
14. There are no ER. Elizabeth Hurley deposits $200,000. With a RR of 50%, how
100,000 PMC in the banking system is $_________.
200,000
much can this bank loan out? $________.
400,000
TMS could be $_________.
15. Assume the RR is 20% & the Lynch Bank borrows $200 from the Fed. This bank’s
1,000
ER are increased by $______.
200 PMC and TMS could both become as much as $_______.
16. RR is 50%. Econ Bank borrows $2 million from the Fed. This bank’s ER are
2 million PMC in the banking system & TMS could both be as much as
increased by $________.
$__
4 million.
17. RR is 50%. Fed buys $50 million of bonds from Jennifer Lopez (Public). The MS
50 million. ER are increased by $___
25 million. Potential money creation
is increased by $___
50 million. TMS could be $______
100 million.
in the banking system is $___
18. RR is 20%. Fed buys $25 million of bonds from Kerri Russell (Public).
The MS is increased by $____
25 million. ER are increased by $____
20 million. PMC in the
banking system is $_____
100 million. TMS could be $_____million.
125
19. RR is 50%. Fed buys $16 million of bonds from Gwyneth Paltrow (Public).
The MS is increased by $____
16 million. ER are increased by $__
8 million. Potential money
16 million. TMS could be $____
32 million.
creation in the banking system is $___
20. If the Japanese bought 70,000 American autos in 2000 but in 2001 bought 4 million American
autos [taste], the dollar would (apprec/deprec) and our imports from Japan would (incr/decr).
21. If U.S. growth rate is increasing faster than that of Canada, the Canadian dollar (loonie)
will (appreciate/depreciate) and our exports to Canada should (increase/decrease).
Wheat
60
Cuba
Terms of Trade
1 C = ___
3 W
Haiti’s DCC: 1C = ___
4W
____ C = 1 W
1/4
80
Wheat
Cuba’s DCC: 1C = ___
2 W
____C = 1 W
1/2
Haiti
0 Corn 30
0 Corn 20
22. (Cuba/Haiti) has an absolute advantage in corn & (Cuba/Haiti) has an
absolute advantage in wheat.
23. (Cuba/Haiti) has a comparative advantage in corn & (Cuba/Haiti) has a
comparative advantage in wheat.
24. The terms of trade would be 1 corn for (1/3/5/7) wheat.
25. The opportunity cost of 1 wheat in Cuba is (1 / ½ / 2 / 3 / 4) corn.
Country
Chad
Fish
10 hours
Corn
50 hours
5 F
Chad’s DCC: 1C = __
1/5 C = 1 F
___
Gabon
5 hours
15 hours
3 F
Gabon’s DCC: 1C = __
___
1/3 C = 1 F
Terms of Trade
1 C = __
4 F
26. Chad has an absolute (advantage/disadvantage) in (fish/corn/both fish & corn).
27. (Chad/Gabon) has a comparative advantage in corn and (Chad/Gabon) has a
comparative advantage in fish.
28. The opportunity cost of 1 corn in Chad is (2/3/4/5/6) fish.
29. If nominal GDP is $100 billion and unemployment is 16%, then
10
20 %; & the
cyclical unemployment is ____%;
the per cent gap is ____
20 billion.
GDP output gap being foregone is $____
30. If nominal GDP is $500 billion and unemployment is 8%, then
cyclical unemployment is ____%;
the per cent gap is ____
%, and
2
4
the GDP output gap being foregone is $____
20 billion.
Again, we are going to turn inputs into outputs.
In 50 hours, Chad can produce an output of 1 corn or 5 fish.
In 15 hours, Gabon can produce an output of 1 corn or 3 fish.
You Are Ready