Midterm1Sec2Key

Midterm1Sec2Key - Economics 102 Fall 2006 M. Doyle Midterm...

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Page 1 Economics 102 Fall 2006 M. Doyle Midterm 1 Section 2 Part A: Answer Key 1. C 2. E 3. B 4. A 5. C 6. B 7. D 8. E 9. A 10. A 11. A 12. B 13. C 14. D 15. C Part B: Short Answer 16 . Consider two small island countries Economica and Macronesia that have no contact with one another. The population of each country is 1,000 people. The citizens of Economica and Macronesia consume everything produced within their respective nations. All of the goods and services produced in these two economies are exchanged in their bustling markets (and the prices of goods are the same across both of these economies). GDP in Economica is $3,500,000 and GDP in Macronesia is $1,700,000. i) (1 Point) Outside observers consistently claim that the citizens of Economica are materially better off than the citizens of Macronesia. They cite the GDP figures as evidence. Assume for the moment that Economica and Micronesia are identical in every respect (other than the numbers given above), would you say that these outside observers are correct? Explain your answer. Yes. GDP measures goods and services produced and exchanged in markets. If everything else is the same, then the country with higher GDP has more consumption opportunities. That's better than having less.
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Page 2 ii) (2 Points) Environmental activists claim that the Micronesian GDP figures are
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Midterm1Sec2Key - Economics 102 Fall 2006 M. Doyle Midterm...

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