Spring_2008_-_Exam_I_-_AM4

Spring_2008_-_Exam_I_-_AM4 - 5 Log RGDP 10 Log GDP 15 Log...

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5 10 15 Beans (Millions of Pounds) Rice (Millions of Pounds) Smithland 5 10 150 20 20 0 Ricardoville A C D B Butter Guns Log RGDP Log GDP Log GDP Log RGDP t 0 t 1 t 2 t 3 Time The production possibilities frontiers for Ricardoville and Smithland – both countries produce Beans and Rice – are shown in the graph below: 1. In Ricardoville the opportunity cost in production equals _______ pounds of rice per pound of beans. a) 2/3 * b) 4/5 c) 5/4 d) 3/2 2. Consider a basket which consists of 13 million pounds of rice and 9 million pounds of beans. Smithland and Ricardoville a) can reach this total level of production only if both countries use all of their resources efficiently. b) cannot reach this total level of production, even if they use all of their resources efficiently. * c) can reach this total level production even if there exists some unemployment or inefficient use of resources in their countries. d) There is not enough information available to determine whether or not Smithland and Ricardoland could reach this level of combined output. 3. We would expect opposition to a free trade agreement between Ricardoville and Smithland to come from * a) producers of beans in Smithland. c) producers of beans in Ricardoville. b) consumers in both countries. d) None of the above are correct. 4. We would expect the terms of trade between these countries to lie between _____ and _____ pounds of beans per pound of rice. * a) 2/3; 5/4 b) 2/3; 4/5 c) 4/5; 3/2 d) 5/4; 3/2 5. The truth of the statement “There is no such thing is a free lunch” is revealed by understanding of: * a) opportunity costs c) comparative advantage b) scarcity d) marginal analysis
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6. Which of the following is the most accurate statement about real and nominal interest rates? * a. Real interest rates can be either positive or negative, but nominal interest rates must be positive. b. Real interest rates and nominal interest rates must be positive. c. Real interest rates must be positive, but nominal interest rates can be either positive or negative. d. Real interest rates and nominal interest rates can be either positive or negative Consider the Production Possibilities Frontier shown here: 7. The concept of scarcity is best represented by basket: a) A b) B * c) C d) D 8. The opportunity cost of Guns in production is smallest at basket: * a) A b) B c) C d) D 9. The opportunity cost of Guns in production is greatest at basket: a) A b) B c) C * d) D 10. Gross Domestic Product (GDP) is defined as the market value of all a) goods and services produced within a given period of time by factors of production within a country. * b)
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Spring_2008_-_Exam_I_-_AM4 - 5 Log RGDP 10 Log GDP 15 Log...

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