Exam 4 Review

Exam 4 Review - ECN 211 Review#4 Q1) If the money supply is $300, the price level is $5 and real GDP equals $600 then the

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 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 circulaJon is___ and nominal GDP is_________. A) 5, $3,000 MV=PQ 300V=5(600) B) 5, $600 300V=3000 V=10 C) 1/10, $1500 D) 10, $600 E) 10, $3,000 Q2) In the table above, assume that before specializaJon and trade, both countries were producing at producJon possibility C. Now if each country specializes according to comparaJve 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. 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 4. Using the diagram above, suppose the country is initially engaged in free trade and the world price is $4. If the government introduces a tariff of $1, what is value of the welfare loss? A) $22.50 B) $50 C) $75 D) $25 E) $12.50 Q5) In the diagram above, assume iniJally 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 domesJc economy? a) $150 b) $50 c) $100 d) $200 e) $250 20 Supply 15 14 13 12 11 10 25 50 75 100 125 150 175 200 225 Demand Q 6. Using the diagram above, suppose the country is initially engaged in free trade and the world price is $11. If the country introduces a $2 tariff how much revenue would the government receive? A) $100 B) $200 C) $150 D) $250 E) $300 Price S W1 W3 W2 7 8 6 4 9 5 3 2 1 D Q7) Using the diagram above, if the world price is W1 and free trade is allowed then domesJc 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 W1 W3 W2 7 8 6 4 9 5 3 2 1 D Q8) Using the diagram above, assume iniJally the country is engaged in free trade. If the world price is W2 and free trade is banned then the loss to the domesJc economy is: A) 1+2+3+4 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). 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 comparaJve advantage in producing [A] neither goods. [B] food. [C] computers. [D] both computers and food. [E] None of the above. 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 transacJon demand. E) Buy bonds from the public. Q13) Suppose the financial market is in equilibrium (investors are indifferent between invesJng at home or in the UK). Assume 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 expected to be $4.40: ₤2.20. If the US rate of interest is 15% what is the risk ahtude of investors? A) Risk Neutral B) Risk adverse C) Risk loving Cans 20 Germany Cans 10 B Korea 12 A 5 4 10 Food 5 10 Food Q14) Suppose, in the figure above, points A and B represent Germany’s and Korea’s iniJal producJon decision. If each country specializes according to comparaJve advantage, what are the potenJal 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) Suppose initially a country does not engage in trade (autarky). The domestic price is $6 and their equilibrium quantity is 80. Suppose if they engage in free trade at a price of $3 they would import 60 units. The welfare gain from engaging in free trade would be _______. Suppose after engaging in free trade domestic producers lobby for a tariff. If introducing a tariff of $1 causes imports to fall to 40 the welfare loss associated with the tariff is _______ A) $180, $40 B) $90, $20 C) $90, $10 D) $30, $40 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 _____ consumpJon 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 25 50 75 100 125 150 175 200 225 Demand Q Q17) Using the diagram above, suppose the country is iniJally 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. 20 Supply 15 14 13 12 11 10 25 50 75 100 125 150 175 200 225 Demand Q Q18) Using the diagram above, suppose the country is iniJally engaged in free trade and the world price is $13. If the government introduces a tariff of $1, what is domesJc 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 25 50 75 100 125 150 175 200 225 Demand Q Q20) Using the diagram above, suppose the country is iniJally 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 ...
View Full Document

This note was uploaded on 03/03/2010 for the course ECN 211 taught by Professor Kingston during the Spring '08 term at ASU.

Ask a homework question - tutors are online