Exam_1_PINK_-Spring_2010

Exam_1_PINK_-Spring_2010 - In the countries of Ricardoville...

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In the countries of Ricardoville and Smithland two goods are produced: Wine and Cheese. The hours of labor required to produce bottles of wine and pounds of cheese in these countries are shown in the table below: WINE (Hours/Bottle) CHEESE (Hours/Pound) Ricardoville 10 5 Smithland 15 10 1. A free trade agreement between these two countries would be opposed by: a) producers of wine in Smithland. b) producers of cheese in Smithland. c) consumers of wine and cheese in Ricardoville. d) All of the above. 2. When trade opens between these countries we would expect the terms of trade to lie between _____ and ______ bottles of wine per pound of cheese. a) 1/2; 2/3 b) 1/2; 3/2 c) 2/3;2 d) 3/2; 2 3. In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 207 for 2007. President Hoover’s 1931 salary was equivalent to a 2007 salary of about a) $5507. b) $1,021,382. c) $1,140,000. d) $15,525,000. 4. On the basis of theory and empirical evidence, economists have reached several conclusions about economic growth. Which of the following is not one of these conclusions? a) A relatively simple way to increase growth rates permanently is to increase a country's saving rate. b) Growth is generally inhibited rather than promoted by policies like protective tariffs. c) Well-established property rights that are enforced by fair and efficient courts are important to economic growth. d) Countries with few domestic natural resources still have opportunities for economic growth. 5. Suppose that real GDP grew more in Country A than in Country B last year. a) Country A must have a higher standard of living than country B. b) Country A's productivity must have grown faster than country B's. c) Both of the above are correct. d) None of the above is correct. 6. We associate the term debt finance with a) the bond market, and we associate the term equity finance with the stock market. b) the stock market, and we associate the term equity finance with the bond market. c) financial intermediaries, and we associate the term equity finance with financial markets. d) financial markets, and we associate the term equity finance with financial intermediaries. 7. Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power? a) $42,000 b) $65,625 c) $68,880 d) $189,000 Exam 1 – Pink Version 1 of 5 Spring 2010
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8. Suppose an economy produces only eggs and ham. In 2005, 100 dozen eggs are sold at $3 per dozen and 50 pounds of ham are sold at $4 per pound. In 2004, the base year, eggs sold at $1.50 per dozen and ham sold at $5 per pound. For 2005, a) nominal GDP is $400, real GDP is $500, and the GDP deflator is 80. b)
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Exam_1_PINK_-Spring_2010 - In the countries of Ricardoville...

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