5. The catchup eect
Consider the economies of Hermes and Traifamadore, both of which produce gobs of goo using oniy toois and workers. Suppose that, during: the
course of cit years, the tenet of physical capitai per worker rises by 5 toois per worker in e
4. Productivity and growth policies
Consider a small island countnir whose only industry is weaving. The following table shows information about the small economy in two differ:
Complete the table by calculating ohysrtai capital per worker as wail
2. Growth experiences
Small differences in the rate of economic growth can lead to large dit'Ferences in living standards. Consider two countries, Upper Richistan and
Lower Richistan. Currently, real GDP per person [average income] is $100,000 in Upper Ri
5. Economic growth and public policalr
Suppose iamahonda. a Japaneseowned motorcvcle manufacturer. builds a production plant in Alabama.
This is an example of foreign direct 1 investment in the United States.
Enqanation: Ciose Exptanaon A
The oorreot answer Is shown.
Show your understanding of Interest by completing the followlng sentence:
Interest is the amount of money earned (earned, owed by the owner of an asset and oaidlipaid, eon-red by
the borrower of the asset for Its use.
Review the statements below and choose the one which Is correct regarding interest as it
relates to money.
V Your answer is correct.
Interest Is another name for the face amount of debt which was honcwed.
Interest is the ownership percentage i
Johan ineeeta $5,000 in a project that is expected to earn a at; annual rate of return. The
earnings will be reinvested in the project each year for ve years. Calculate how much money
he IInrlll have at the end of ve years by uslng the Future Value ufftah
1n. Undershncllng how shlrklng decreases mm output in Ail
Madeline sells bottled water from a small stand by the beach. 0n the last da'pr of summer vacation, there are mam:f
people on the tleachIr and Madeline realizes that she can make a lot more money'
5. Thewlnner's ours: M As: a
.IacitIr Jason, and Patrick are all interested In the chair being
auctioned off at the Jean Auction House in a rst-price sealed-bid
auction. cfw_What Is this kind of auction?) The only Infon'natlon the
bidders have about the c
Attempts: 1 ' ' ' keeptne Highest: 1:4
B. How asymmetric information prevent-s gains from trade A; A3 a
Albert sees a classified ad offering a used digital camera for $5. On the opposite page, he sees a big color ad from a
national electronics chain
13. A supply and demand puzzle
111E following graph shows the market for laptops in 200?. Between EDI? and EEDB, the eguilibn'um price of laptops remained constant, but the
equilibrium quantityr of laptops increased. From this, you can conclude that betwe
When a country has a comparative advantage in thE production of a good, it means that it can produce this good at a lower opportunity cost
than its trading partner. Then the country will specialize in the producljon of this good and trade it for other goo
111e following graph shows the market for cars in EDDB. Between EDDB and EDDD, the equilibrium quantityr of cars remained consta nt,r but the
equilibrium price of cars decreased. From this, you can conclude that between EDDS and EDDD, the supplyr of ca rs
Consider two neighboring island countries called Doion'um and Contente. They each haye 4 million labor hours ayaiiable per month that they car
use to produce jeans, corn, or a combination of both. The following table shows the amount ofjeans or corn that
'Ihe market price of cheeaeburgera in a college town decrea5ed recenthr, and the Students in an economics. cla55 are debating the ca u5e of the
price decrea 5e. Some 5tudent5 5ugge5t that the price decreaaed becauae Several new burger joint5 have recently
The foitowing tahie contains statements that provide some anaivsis of ooiicies that address the minimum wage .
Categohlze each of these statements as either positive or nonnative.
Statement Pos Eve Normative
Ail Americans shooid earn more than $25,000 per
On January 1, KC Ca. burrowed $10,000 cash from Lake St. Bank by signing a 90-day. 3%
interest-bearing nete. Haw much interest will result from this nete?
V Your answer is en rrect.
$300 When a company has a current obligation to ma
Accprding to the US. Treasury,
1" A. nrts dd net have to accept cash as payment fer deeds and services.
B. creditors do not have to accept cash in payment of debts.
C. US. dpllars must be accepted as payment for any good er service said in the Uni
Concept: Fiat Money
The US. dollar can best be described as
O A. commodity money.
0 El. reserye money.
cfw_:1 C. commoditybacked money.
<3 D. at money.
Click to select your answer and then cliclt Chec
All parts showing
V Well done!
A suitable medium of
Your roommate argues that he can think of no better situation than living in a deationarv economy, as prices of goods and services wc
a deation people can be made worse off because
A. the purchasing power of peoples' incomes would increase.
3 El. borrower
Gonoept: Functions of Money 2
Which of the following is NOT a function of money?
(:3 A. Unitofaccount
Ct B. Store of value
If C. Medium of exchange
(it: D. Acceptability
V Good job!
1. Medium of exchange. 1When sellers of goods and services are willing to
4. |.'3Ipportunit'.lr cost and production possibilities
Lucia is a skiHed toy:r maker who is able to produce both cars and puzzles. She has 8 hours a d211,:r to produce toys. The foliowing table shows the
dairyr output resulting Jfrom various possible com
1- The circular flow model
The foiewing cfw_agram presents a cinderew model at a simple emmmv. Ihe ute: set at anows cfw_stmwn in green stmws Hie ew ef delars,
and HIE inner set of arrows [shown in red] shows the mnespontwg ew 0f inputs and mltputs.
2. Ellicisenclilr in the production possibilities model
Suppose Japan produces on|'|.ur two goods: corn and cars. The following graph shows Japan's current production possibilities frontier, along with
six output combinations. represented by black points
Detennfne whe'rer ead of the fouwing tanks would more Iikeiy to be Studied in mJU'DECDHDmeS or mammmics.
The effects. of the internet on the pricing of u5ec| cars.
' ' cfw_E O
The effect of a cigarette tax on the quantity
3. Shifts in production possibilities
Suppose Spain produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for
aifalfa, an agricultural good, and industrial robots, a capital good.
6. Normative and positive statements
The foliowing ta hie contains statements that provide some anaivsis of poiicies that address taxes.
Categon'ae eadrr of obese statements as either positive or nonnative.
Statement Positive Normative
Taxes are too high.
Attempts: 1.8 Keep the Highest: 1.8!:
5. Ination and unemployment
Suppose that the government lerieves the economvr is producing goods and services lsevond its optimal level. The government therefore decides
to decrease the quantity:r of mDnEy' in the eco
4. Scarcity, opportunity oosl, and marginal analysis
Consrder the following scenano:
Sharon is training for a triathlon, a timed race mat combines. swimming, biking, and mnning. Sharon has only 2D hours per Iweek
that she can devote to training for her
Consider HIE following scenario:
Antonio is training for a triathlon, a timed race that combines swimming, biking, and anning. Each hour he spends swimming is an
hour 1at he can't spend biking or running.
Which basic principle of individual choice doe