Transcript ECN 212 Review #4

ECN 211 Review #4
Q1) If the money supply is $300, the price level
is $5 and real GDP equals $600 then the
velocity of circulation is___ and nominal GDP
is_________.
A) 5, $3,000
B) 5, $600
C) 1/10, $1500
D) 10, $600
E) 10, $3,000
Q2) In the table above, assume that before specialization and trade, both countries were
producing at production possibility C. Now if each country specializes according to
comparative advantage, what will be the gains from trade?
[A] 10 units of sugar
[B] 20 units of sugar and 10 units of coffee
[C] 20 units of coffee
[D] 20 units of coffee and 10 units of sugar
[E] None of the above.
Combination
Alpha
Beef
Microchips
Beta
Beef
Microchips
A
B
0
25
200
150
0
25
300
225
C
50
100
50
150
D
E
75
100
50
0
75
100
75
0
Q3) According to the table above, the opportunity cost of a microchip in Alpha is
__________ units of beef, and the opportunity cost of a microchip in Beta is
__________ units of beef. The opportunity cost of a unit of beef is __________
units of microchips in Alpha and __________ units of microchips in Beta.
[A] 3; 2; 1/3; 1/2
[B] 1/3; 1/2; 3, 2
[C] 1/2; 1/3 ; 2; 3
[D] 1/2; 3; 1/3; 2
[E] 2; 3; 1/2; 1/3
$
S
5
4
3
2
D
150 200 250 300 350 400
450
Wheat
Q4) In the diagram above, assume initially the country is engaged in free trade and the world
price is $3. If free trade is banned what is the loss to the domestic economy?
a) $150
b) $50
c) $100
d) $200
e) $400
$
S
5
4
3
2
D
150 200 250 300 350 400
450
Wheat
Q5) In the diagram above, assume initially the country is engaged in free trade. If the world price
is $2 and a quota of 200 units is imposed, what is the loss to the domestic economy?
a) $150
b) $50
c) $100
d) $200
e) $250
$
S
5
4
3
2
D
150 200 250 300 350 400
450
Wheat
Q6) In the diagram above, assume initially the country is engaged in free trade. If the
world price is $2 and a tariff of $2 is imposed, how much government revenue is
received?
a) $100
b) $200
c) $50
d) $150
e) None of the above.
Price
S
7
W1
6
W3
4
W2
8
5
3
2
1
9
D
Q7) Using the diagram above, if the world price is W1 and free trade is allowed then domestic
producer surplus is:
A) 6+5.
B) 6+5+4+3+9.
C) 8+6+5+4+3+9
D) 6+5+4+3.
E) 4+3+9.
Price
S
7
W1
6
W3
4
W2
8
5
3
2
1
9
D
Q8) Using the diagram above, assume initially the country is engaged in free
trade. If the world price is W2 and free trade is banned then the loss to
the domestic economy is:
A) 1+2+3+4-consumers (4 and 3 producer)
B) 1+2+3+4+9
C) 8
D) 1+2
E) None of the above.
Q9) Using the table above. Suppose the world price is E. The government introduces a
tariff of (D-E)(price becomes D). What is the area that represents the tariff revenue
that the government would receive?
A) HJNM
B) HJPO
C) HUXO
D) HUWM
E) There would be no government revenue.
Q10) According to the table in the scenario above,
Philippines has a comparative advantage in
producing
[A] neither goods.
[B] food.
[C] computers.
[D] both computers and food.
[E] None of the above.
Canada
United States
Coal
6 tons
4 tons
Paper
1 ton
2 tons
Q11) In the table above, what are the acceptable terms of trade?
[A] 0.5 coal ≤ 1 paper ≤ 0.66 coal
[B] 0.5 paper ≤ 1 coal ≤ 6 paper
[C] 4 paper ≤ 1 coal ≤ 6 paper
[D] 0.16 coal ≤ 1 paper ≤ 0.5 coal
[E] 2 coal ≤ 1 paper ≤ 6 coal
Q12) Which of the following could the Fed
undertake to increase the money supply?
A) An increase in the reserve requirement.
B) An increase in the discount rate.
C) Sell bonds to the public.
D) Increase transaction demand.
E) Buy bonds from the public.
Q13) Suppose the UK rate of interest is 2% and at the start of the year the
exchange rate is $4.80:₤3.0 however at the end of the year it is $4.40:
₤2.20. What is the dollar return from investing in the UK?
A) -23%
B) -8.33%
C) -6.33%
D) 27%
E) 10.33%.
Cans
Cans
Germany
20
Korea
10
B
A
12
4
5
10
Food
5
10
Food
Q14) Suppose, in the figure above, points A and B represent Germany’s and Korea’s
initial production decision. If each country specializes according to comparative
advantage, what are the potential gains to trade?
[A] 9 food and 17 cans
[B] 6 foods
[C] 3 cans and 1 food
[D] 6 cans
[E] 3 cans
Q15) In the table above, which of the following is true?
[A] Iowa has the comparative advantage in cookies.
[B] Ohio has the comparative advantage in cookies.
[C] Ohio has the comparative advantage in chili.
[D] Ohio has an absolute advantage in Chili.
[E] None of the above.
Q16) If the Fed wants to decrease aggregate demand it
could______ the reserve requirement, which will ________
the money supply, which will ______ interest rates. The
change in interest rates will _____ consumption and
investment, causing aggregate demand to decrease.
A) decrease, increase, decrease, increase,
B) increase, decrease, increase, decrease.
C) increase, increase, decrease, decrease
D) decrease, decrease, increase, increase.
E) None of the above.
20
Supply
15
14
13
12
11
10
Demand
25
50
75
100
125 150 175 200 225
Q
Q17) Using the diagram above, suppose the country is initially engaged in free trade
and the world price is $11. If the government introduces a quota of 50, what is
consumer surplus?
A)$250
B) $300
C) $600
D) $900
E) None of the above. $450
20
Supply
15
14
13
12
11
10
Demand
25
50
75
100
125 150 175 200 225
Q
Q18) Using the diagram above, suppose the country is initially engaged in free trade and the
world price is $13. If the government introduces a tariff of $1, what is domestic producer
surplus?
A)$500
B) $400
C) $200
D) $100
E) $300
19) Suppose the price of oil in the US is $30 and
in the UK it sells for ₤40. If PPP holds then E
(dollars per unit of foreign currency) has to
be?
A)1.33
B)0.75
C)0.5
D)0.66
E)None of the above.
20
Supply
15
14
13
12
11
10
Demand
25
50
75
100
125 150 175 200 225
Q
Q20) Using the diagram above, suppose the country is initially engaged in free trade and the
world price is $11. If the government introduces a tariff of $3, what is welfare loss?
A)$250
B) $450
C) $200
D) $225
E) $300