Transcript AP midterm study guidex

AP Mid-Term Team Competition
To be able to produce more of
something with the same amount of
resources means you have a(n)
________ advantage.
• A) Absolute
• B) Comparative
To be able to produce something at
a lower opportunity cost means
you have a(n) __________
advantage.
• A) Absolute
• B) Comparative
You can have the __________
advantage in everything, but you can’t
have the _________ in everything.
• A) Absolute, Comparative
• B) Comparative, Absolute
A person or country should specialize
in producing what they have a(n)
__________ advantage in producing,
and trade.
• A) Absolute
• B) Comparative
What is USA’s opportunity cost of 1 computer?
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A) 1/3 wheat
B) 3 wheat
C) 1/3 computer
D) 3 computers
Maximum
that can be
produced
of each.
Comput Wheat
ers
USA
500
1500
Kenya
200
1000
Which country has the comparative
advantage in hammers?
• Country A’s opp. cost of 1 hammer=100 nails
• Country B’s opp. cost of 1 hammer=200 nails
• A) Country A
• B) Country B
Which country has the comparative
advantage in hamster wheels?
• Country A’s opp. cost 1 hamster wheel = ½ hamster
• Country B’s opp. cost 1 hamster wheel=3/5 hamster
• A) Country A
• B) Country B
Which country has the comparative
advantage in hamsters?
• Country A’s opp. cost 1 hamster wheel = ½ hamster
• Country B’s opp. cost 1 hamster wheel=3/5 hamster
• A) Country A
• B) Country B
Which country has the comparative
advantage in cranes?
• Country A’s opp. cost 1 crane = 1,000 bungee
cords
• Country B’s opp. cost 1 crane = 10,000 bungee
cords
• A) Country A
• B) Country B
Which country has the comparative
advantage in bungee cords?
• Country A’s opp. cost 1 crane = 1,000 bungee
cords
• Country B’s opp. cost 1 crane = 10,000 bungee
cords
• A) Country A
• B) Country B
Which country has the lowest opportunity cost
in the production of computers?
• A) Kenya
• B) USA
Maximum
that can be
produced
of each.
Comput Wheat
ers
USA
500
1500
Kenya
200
1000
Which country has the comparative advantage
in computers?
• A) Kenya
• B) USA
Maximum
that can be
produced
of each.
Comput Wheat
ers
USA
500
1500
Kenya
200
1000
Which country should specialize in wheat?
• A) Kenya
• B) USA
Maximum
that can be
produced
of each.
Comput Wheat
ers
USA
500
1500
Kenya
200
1000
Who has a comparative advantage in stereos, and
who has a comparative advantage in bling?
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A) Rio -Both
B) Morocco -Both
C) Rio, Morocco
D) Morocco, Rio
Stereos
Bling
50
50
Morocco 20
40
Rio
“GDP” means the same thing as:
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A) nominal GDP
B) real GDP
C) national income
D) A & B
E) A & C
When Real GDP increases
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A) nominal GDP always increases too.
B) nominal GDP always falls.
C) nominal GDP may rise or fall.
D) nominal GDP stays constant.
If the price level fell but nominal GDP
stayed the same from year one to year
two, then real GDP must have
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A) risen
B) also fallen
C) stayed constant
D) not enough info
Which of the following people would be
considered unemployed?
• A) A person who quits work to care for aging
parents
• B) A person who stayed home to raise his children
and now starts looking for a job
• C) A person who quits a job to return to school
full time
• D) A person who is qualified to teach but is
driving a bus until a teaching job is available
• E) A person who works two part-time jobs but is
looking for a full-time job
• Assuming the total population is 100
million, the civilian labor force is 50 million
and 47 million workers are employed, the
unemployment rate:
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a) is 3%
b) is 6%
c) is 7%
d) is 9%
e) can not be determined
In calculating the unemployment rate,
"discouraged" workers who are not
actively seeking employment are:
• a. counted as neither unemployed nor part of
the labor force.
• b. treated as part time workers.
• c. included as part of the labor force but not as
unemployed.
• d. counted as employed.
Which of the following will be counted
as unemployed?
• (A) Persons who quit their previous jobs to stay at home to
care for sick parents
• (B) Persons who were laid off from their previous jobs and
have not applied for a job in two years
• (C) Persons who were fired from their previous jobs and are
actively applying for work
• (D) Persons who have given up looking for jobs after long
searches
• (E) Persons who quit their previous jobs to start their own
businesses
Inflation hurts
• A) lenders at fixed rates.
• B) borrowers at fixed rates.
• C) lenders at adjustable rates.
Inflation helps
• A) lenders at fixed rates.
• B) borrowers at fixed rates.
In order to protect themselves in case
of unanticipated inflation, lenders
often
• A) make adjustable-rate loans.
• B) make fixed-rate loans.
Who is hurt MOST by
unanticipated inflation?
• A) lenders at a fixed rate of interest
• B) borrowers at a fixed rate of interest
• C) workers who get a yearly cost-of-living
raise
• D) someone holding a lot of gold
Of the following groups, the one hurt
the LEAST by unanticipated inflation
is
• A workers who have cost-of-living adjustments in
their labor contracts
• B people who have saved money in accounts with
a fixed interest rate
• C banks that have made long term, fixed rate
mortgage loans
• D consumers who buy goods and services at
prevailing market prices
Sue got a 10% raise at work this
year, & the rate of inflation was
12%. Sue’s
• A) nominal pay rose and her purchasing power
rose.
• B) nominal pay rose and her purchasing power
fell.
• C) nominal pay fell and her purchasing power
rose.
• D) nominal pay fell and her purchasing power
fell.
The value of a price index in 2000 was
172. What was the value of that price
index in it’s base year?
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A) 72
B) 100
C) 136
D) 152
The value of a price index in 2000 was
172. What was the rate of inflation
between the base year and 2000?
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A) 72%
B) 100%
C) 136%
D) 152%
The Consumer Price Index (CPI) is an
indicator of which of the following?
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A
B
C
D
the size of an economy
the velocity of money
the level of inflation or deflation
the presence of a budget deficit or surplus
If one wanted to know whether there
had been inflation or not, the BEST
measure to observe would be the
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A. GDP.
B. business cycle.
C. CPI.
D. national debt
1) Joe loses his job because of the
recession. Which type of unemployment
is it??
• A) frictional
• B) cyclical
• C) structural
2) Sally loses her job because computers
make it obsolete. Which type of
unemployment is it??
• A) frictional
• B) cyclical
• C) structural
3) Jason loses his job because he spit in
his bosses’ face. Which type of
unemployment is it??
• A) frictional
• B) cyclical
• C) structural
4) Suppose that Peggy, a recent college
graduate, decides to look for a job instead
of going to graduate school. If she is unable
to find a job that suits her interests right
away, what type of unemployment is she
MOST LIKELY experiencing?
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A structural
B seasonal
C frictional
D cyclical
5) What problem might policymakers be
trying to address MOST if they increase
funding for training programs covering skills
such as computer repair, programming, and
networking?
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A frictional unemployment
B structural unemployment
C cyclical unemployment
D seasonal unemployment
6) Is it counted & where??
A haircut from Regis Salon at the mall.
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A) Yes, consumption
B) Yes, investment
C) Yes, government
D) Not counted
7) Is it counted & where??
The purchase of the scissors used to
cut your hair.
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A) Yes, consumption
B) Yes, investment
C) Yes, government
D) Not counted
8) Is it counted & where??
A haircut Mom gave you.
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A) Yes, consumption
B) Yes, investment
C) Yes, government
D) Not counted
9) When Mr. Cook buys his
Ferrari…
• A) GDP & consumption will both rise.
• B) Consumption & imports will rise, GDP will
stay the same.
• C) Consumption & exports will rise, GDP will
stay the same.
• D) Imports will rise, GDP will fall.
• E) GDP will stay the same, and no sectors will
be affected.
Maximum amount each
could produce.
Food
Clothes
Northland
100
100
Southland
400
200
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1. Northland’s O.C. 1 Food = __________
2. Southland’s O.C. 1 Food = __________
3. Comparative Advantage Food = _______
4. __________ should specialize in food.
5. __________ should specialize in clothes.
One sheet of paper per group.
Jill
Pat
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Min/Song
30
50
Min/Meal
10
25
1) Who has absolute advantage in each?
2) What’s Jill’s opportunity cost of 1 song?
3) What’s Pat’s opportunity cost of 1 song?
4) What’s Jill’s opportunity cost of 1 meal?
5) What’s Pat’s opportunity cost of 1 meal?
6) Who has the comparative advantage in songs?
7) Who has the comparative advantage in meals?
8) What are the terms of trade for 1 song?
Country A
Country B
Fish
10 labor-hours
20 labor-hours
Wheat
20 labor-hours
60 labor-hours
1) Absolute Fish?
2) Absolute Wheat?
3) Comparative Fish?
4) Comparative Wheat?
5) Who should specialize in Fish?
6) Who should import Wheat?
One sheet of paper per group.
Jim
Pam
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Songs
10
15
Meals
5
10
1) Who has absolute advantage in each?
2) What’s Jim’s opportunity cost of 1 song?
3) What’s Pam’s opportunity cost of 1 song?
4) What’s Jim’s opportunity cost of 1 meal?
5) What’s Pam’s opportunity cost of 1 meal?
6) Who has the comparative advantage in songs?
7) Who has the comparative advantage in meals?
8) Graph it!
Constructing a Price Index-Continued
• Price index =
• (selected basket price/ base yr. basket price)X100
• The base-year price index always = 100!
• Inflation =
• % change in price index, [(new-old)/old]
Constructing a Price Index-Continued
• Example:
• The country of Spamelot only makes Spam and
crackers.
•
1960
2010
• P Spam
0.40
1.20
• P Crackers
0.60
1.80
• Mkt Basket P
____
____
• P Index (base year 1960) 100
____
• Inflation from 1960-2010
_____
Measuring Unemployment
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# unemployed (must be looking)
civilian labor force
• civilian means “not military”
• labor force = employed + unemployed
– (all the people either working or looking for work)
Gross Domestic Product
• $ value of all final goods/services made in our
country, in 12 months
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Not included:
Nonmarket transactions (illegal)
Intermediate products
Secondhand sales
Transfer payments
Asset purchases (stocks, mergers, loans)
Year 3 = base year.
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Year Units of Output P. per Unit GDP RGDP
1
9
$2
2
11
$3
3
14
$4
4
19
$5
5
21
$6
Formula Quiz
• 1) C=$5, I=$2, G=$3, M=$4, GDP=$8. What is X?
• 2) Market Basket Price (Base Year)=$20. Market
Basket Price (Year 2)=$25. What’s the value of the
price index in year 2?
• 3) Price index Year A: 200
Price index Year B: 250 --Inflation between
Years A&B?
• 4) Frictional U. is 4%. Natural Rate of U. is 7%.
What is the Structural Rate of U?
• 5) Real interest rate was 3%. Inflation was 8%.
What was nominal interest rate?
• 6) MPS is 0.2. What is the tax multiplier?
MPS=0.25
• What’s the maximum possible effect on
GDP/AD if:
• 11) G increases $2 billion?
• 12) Tax cut $3 billion?
• 13) Tax increase $4 billion?
• 14) G increase $2b, tax decrease $2b?
• 15) G increase $2b, tax increase $2b?
• 16) G increase $5b, tax increase $5b?
Expenditure Model and AD
• AD consists of C+I+G+(X-M)
• Anything that changes C, I, G, or (X-M) shifts
AD.
PL
AD
RGDP
(Other) AD Shifters
 Expectations
 Consumer
 Producer
 Prices
 Wealth
 Debt
 Fiscal Policy
 Taxes
 Spending
 Monetary Policy
 Money Supply
 Interest Rates
SRAS shifters
• Input costs
– Commodities
– Wages
• Productivity
• Business Taxes
– Wait, aren’t taxes a demand shifter?????
LRAS shifters
• When LRAS shifts right, this is called:
• What causes ec. growth?
– Amount of _________
••-
– Quality of _________ (i.e. education)
– T____________