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international economics theory

Questions and Answers of International Economics Theory

a. What is the percent change in the price of an English textbook from 2008 to 2010?
7. Eastland College is concerned about the rising price of textbooks that students must purchase. To better identify the increase in the price of textbooks, the dean asks you, the Economics
e. How do the percent change in real GDP and the percent change in real GDP per capita compare? Which is larger?Do we expect them to have this relationship?
d. Calculate the percent change in real GDP per capita from 1960 to 1970, 1970 to 1980, 1980 to 1990, and 1990 to 2000. Which period had the highest growth rate?
c. Calculate real GDP per capita for each of the years in the table.
b. Calculate the percent change in real GDP from 1960 to 1970, 1970 to 1980, 1980 to 1990, and 1990 to 2000. Which period had the highest growth rate?
a. Why is real GDP greater than nominal GDP for all years before 2000 and lower for 2007? Does nominal GDP have to equal real GDP in 2000?
6. The accompanying table shows data on nominal GDP (in billions of dollars), real GDP (in billions of year 2000 dollars), and population (in thousands) of the United States in 1960, 1970, 1980,
c. Calculate GDP as factor income.
b. Calculate GDP as spending on final goods and services.
a. Calculate GDP as the value added in production.
5. The economy of Pizzanistan resembles Pizzania (from Problem 4) except that bread and cheese are sold both to a pizza company as inputs in the production of pizzas and to consumers as final goods.
e. How does the government finance its spending?152 s e c t i o n 3 Measurement of Economic Performancea. Calculate GDP as the value added in production.b. Calculate GDP as spending on final goods
d. Does the total flow of money out of households—the sum of taxes paid, consumer spending, and private savings—equal the total flow of money into households?
c. What is the value of disposable income?
b. What is the value of net exports?
a. What is the value of GDP in Macronia?
2. A more complex circular-flow diagram for the economy of Macronia is shown at right.
4. The small economy of Pizzania produces three goods (bread, cheese, and pizza), each produced by a separate company. The bread and cheese companies produce all the inputs they need to make bread
h. Calculate government purchases on national defense as a percentage of federal government purchases of goods and services.
g. Calculate exports as a percentage of imports.
f. Calculate consumer spending on services as a percentage of total consumer spending.
e. Calculate gross domestic product.
d. Calculate government purchases of goods and services and investment spending.
c. Calculate net exports.
b. Calculate private investment spending.
a. Calculate consumer spending.
3. The components of GDP in the accompanying table were produced by the Bureau of Economic Analysis.
e. How does the government finance its spending?
d. Does the total flow of money out of households—the sum of taxes paid, consumer spending, and private savings—equal the total flow of money into households?
c. What is the value of disposable income?
b. What is the value of net exports?
a. What is the value of GDP in Macronia?
2. A more complex circular-flow diagram for the economy of Macronia is shown at right.
e. How does the government of Micronia finance its purchases of goods and services?
d. Does the total flow of money out of households—the sum of taxes paid and consumer spending—equal the total flow of money into households?
c. What is the value of disposable income?
b. What is the value of net exports?
a. What is the value of GDP in Micronia?
1. At right is a simplified circular-flow diagram for the economy of Micronia.
5. If your wage doubles at the same time as the consumer price index goes from 100 to 300, your real wagea. doubles.b. falls.c. increases.d. stays the same.e. cannot be determined.
4. The value of a price index in the base year isa. 0.b. 100.c. 200.d. the inflation rate.e. the average cost of a market basket of goods.
3. Which of the following is true of the CPI?I. It is the most common measure of the price level.II. It measures the price of a typical market basket of goods.III. It currently uses a base period of
2. If the consumer price index increases from 80 to 120 from one year to the next, the inflation rate over that time period wasa. 20%b. 40%c. 50%d. 80%e. 120%
1. If the cost of a market basket of goods increases from $100 in year 1 to $108 in year 2, the consumer price index in year 2 equals if year 1 is the base year.a. 8b. 10c. 100d. 108e. 110
3. The consumer price index in the United States (base period 1982–1984) was 201.6 in 2006 and 207.3 in 2007. Calculate the inflation rate from 2006 to 2007.
b. Virtually no households had broadband Internet access a decade ago. Now many households have it, and the price has been falling.
a. A typical family owns more cars than it would have a decade ago. Over that time, the average price of a car has increased more than the average prices of other goods.
2. For each of the following events, explain how the use of a 10-year-old market basket would bias measurements of price changes over the past decade.
1. Consider Table 15.1 but suppose that the market basket is composed of 100 oranges, 50 grapefruit, and 200 lemons. How does this change the pre-frost and post -frost consumer price indexes?
The importance of the consumer price index and other price indexes
What a price index is and how it is calculated
How the inflation rate is measured
b. Lanwei is reimbursed by her company for her work -related travel expenses.
a. When inflation is expected to be high, workers get paid more frequently and make more trips to the bank.
1. In the following examples, is inflation creating winners and losers at no net cost to the economy or is it imposing a net cost on the economy? Explain. If inflation is imposing a net cost on the
5. Changing the listed price when inflation leads to a price increase is an example of which type of cost?a. price levelb. shoe-leatherc. menud. unit-of-accounte. monetary Tackle the Test:
4. Because dollars are used as the basis for contracts, inflation leads to which type of cost?a. price levelb. shoe-leatherc. menud. unit-of-accounte. monetary
3. If inflation causes people to frequently convert their dollars into other assets, the economy experiences what type of cost?a. price levelb. shoe-leatherc. menud. unit-of-accounte. monetary
2. If your nominal wage doubles at the same time as prices double, your real wage willa. increase.b. decreasec. not change.d. double.e. be impossible to determine.
2. Most people in the United States have grown accustomed to a modest inflation rate of around 2-3%. Who would gain and who would lose if inflation came to a complete stop for several years?
1. The widespread use of technology has revolutionized the banking industry, making it much easier for customers to access and manage their assets. Does this mean that the shoe -leather costs of
e. Compare the two countries’ real GDP per capita in 2010 using 2005 as the base year.
d. Calculate the percent increase in real GDP between 2005 and 2010 for each country.
c. Calculate real GDP in each country in 2010, using 2005 as the base year.
b. What happened to the price level in each country between 2005 and 2010?
a. Calculate the percent increase in nominal GDP between 2005 and 2010 for each country.
2. Use the information in the table below to answer the following questions.
e. Calculate real GDP in Britannica for 2010 using 2008 as the base year.
d. Calculate real GDP in Britannica for 2008 using 2008 as the base year.
c. Calculate nominal GDP in Britannica for 2008.
What is the percent change in the price of pizza from 2009 to 2010?
a. What is the percent change in computer production from 2008 to 2009?
5. Which of the following components makes up the largest percentage of GDP measured by aggregate spending?a. consumer spendingb. investment spendingc. government purchases of goods and servicesd.
4. Which of the following is not included in GDP?a. capital goods such as machineryb. importsc. the value of domestically produced servicesd. government purchases of goods and servicese. the
3. Which of the following is included in GDP?a. changes to inventoriesb. intermediate goodsc. used goodsd. financial assets (stocks and bonds)e. foreign-produced goods
2. GDP is equal toa. the total value of all goods and services produced in an economy during a given period.b. C + I + G + IM.c. the total value of intermediate goods plus final goods.d. the total
1. Which of the following is true? The simple circular-flow diagram I. includes only the product markets.II. includes only the factor markets.III. is a simplified representation of the
5. Which of the following components makes up the largest percentage of GDP measured by aggregate spending?a. consumer spendingb. investment spendingc. government purchases of goods and servicesd.
4. Which of the following is not included in GDP?a. capital goods such as machineryb. importsc. the value of domestically produced servicesd. government purchases of goods and servicese. the
3. Which of the following is included in GDP?a. changes to inventoriesb. intermediate goodsc. used goodsd. financial assets (stocks and bonds)e. foreign-produced goods
2. GDP is equal toa. the total value of all goods and services produced in an economy during a given period.b. C + I + G + IM.c. the total value of intermediate goods plus final goods.d. the total
1. Which of the following is true? The simple circular-flow diagram I. includes only the product markets.II. includes only the factor markets.III. is a simplified representation of the
3. Consider Figure 10.3. Explain why it would be incorrect to calculate total value added as $30,500, the sum of the sales price of a car and a car’s worth of steel.
2. Identify each of the sectors to which firms make sales. What are the various ways in which households are linked with other sectors of the economy?
1. Explain why the three methods of calculating GDP produce the same estimate of GDP.
b.How do you think fishermen will change how they fish in response to this policy?
a. Use a diagram to show the effect of the quota on the market for swordfish in 1991.
19. The waters off the north Atlantic coast were once teeming with fish. Now, due to overfishing by the commercial fishing industry, the stocks of fish are seriously depleted. In 1991, the National
d. What are the inefficiencies that arise in each of these cases(parts a and b)?
c. Which of these programs (in parts a andb) costs corn consumers more? Which program costs the government more?Explain.800 1,000 1,200$5 43 21 0Price of corn(per bushel)Quantity of corn (bushels)D SE
b. Suppose the government sets a target price of $5 per bushel for any quantity supplied up to 1,000 bushels. How many bushels of corn are purchased by consumers and at what price? by the government?
a. If the government sets a price floor of $5 per bushel, how many bushels of corn are produced? How many are purchased by consumers? by the government? How much does the program cost the government?
18. For the last 70 years, the U.S. government has used price supports to provide income assistance to U.S. farmers. At times the government has used price floors, which it maintains by buying up the
17. Until recently, the standard number of hours worked per week for a full-time job in France was 39 hours, similar to in the United States. But in response to social unrest over high levels of
c. Given your answer to part b and the information in the table, what do you think is the relationship between the level of involuntary unemployment and the level of the minimum wage? Who benefits
b. Suppose the French government sets a minimum yearly wage of 35,000 euros. Is there any involuntary unemployment at this wage? If so, how much? Illustrate with a diagram.What if the minimum wage is
a. In the absence of government interference, what is the equilibrium wage and number of graduates hired per year? Illustrate with a diagram. Will there be anyone seeking a job at the equilibrium
16. As noted in the text, European governments tend to make greater use of price controls than does the U.S. government.For example, the French government sets minimum starting yearly wages for new
d. Give two examples of inefficiencies arising from wasted resources that are likely to result from this policy. What is the missed opportunity in each case?

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