According to the laws of demand and supply, no buyer would be willing to pay more than the equilibrium price and no seller would be willing to sell for less than the equilibrium price.

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Regarding inflation, which statement is incorrect?

a.

Core inflation is the inflation of energy and food prices.

b.

Demand-pull inflation is the possible result of an expansion of aggregate demand.

c.

High inflation can worsen income inequality.

d.

An increase in the costs of raw materials or labor can contribute to cost-push inflation.

e.

Inflation makes the perception of relative prices more difficult.

Question3

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Given the information in the table below, what is the difference (in absolute value) between the real aggregate products of countries A and B in A$ at constant purchasing power of year 3 for years 1, 2, and 3 respectively? Remember the following steps: step 1, make sure that the general price index has the correct base year; step 2, transform the nominal aggregate product in the country's currency into the real aggregate product in the country's currency using the correct general price index; and step 3, in the case of country B, transform the real aggregate product in B$ into the real aggregate product in A$ using the correct exchange rate (pay attention that exchanges rates are B$/A$, so you may need to use division or multiplication). Finally, just check the absolute value of the difference between the real aggregate products.

	Year 1	Year 2	Year 3
Country A's nominal aggregate product in the local currency A$.	A$800	A$1000	A$1500
Country A's general price index.	0.800	1.000	1.250
Country B's nominal aggregate product in the local currency B$.	B$1800	B$2160	B$2592
Country B's general price index.	1.000	0.960	1.600
Market exchange rate (B$/A$).	1.60	1.80	2.00
PPP exchange rate (B$/A$).	1.00	1.20	1.50

a.

A$3070, A$4150 and A$2388.

b.

A$670, A$1150 and A$228.

c.

A$1630, A$1750 and A$228.

d.

None of the alternatives is correct.

e.

A$1630, A$3070 and A$2388.

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The theory of comparative advantage helps to explain international intra-industry trade.

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0:58:32

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An increase in the share of the population below the absolute poverty line also indicates a worsening of income inequality.

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The national unemployment rate is produced from the Current Employment Statistics survey, also known as Payroll Survey.

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Against what kind of unemployment can fiscal policy and monetary policy be used successfully?

a.

Natural unemployment.

b.

Frictional unemployment.

c.

Structural unemployment.

d.

All kinds of unemployment.

e.

Cyclical unemployment.

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Brazil is an important coffee exporter. Assume that the graph below represents its coffee market (D is demand and S is supply). With no international trade, Brazil would produce the quantity Q_Bat the price P_B. With international trade, however, at the international price P_Ifor coffee, consumers buy the quantity Q_I,Dwhile producers sell the quantity Q_I,S. The difference Q_I,S- Q_I,Drepresents the exports of coffee from Brazil. Consider that A₁to A₆are the areas delimited by the solid and dashed lines. With regard to social surplus, which statement is incorrect?

a.

The deadweight loss due to international trade is A₆.

b.

The social surplus with no international trade is A₁+ A₂+ A₃+ A₄+ A₅.

c.

With international trade, the consumer surplus is A₁.

d.

With international trade, the producer surplus is A₂+ A₃+ A₄+ A₅+ A₆.

e.

The social surplus with international trade is A₁+ A₂+ A₃+ A₄+ A₅+ A₆.

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Question9

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Paul's budget constraint line for goods A and B is Q_B= -(1/4)Q_A+ 5, where Q_Ais the quantity of good A and Q_Bis the quantity of good B. According to that budget constraint line, which alternative is incorrect?

a.

Paul's budget could be $100 and the market prices of A and B could be respectively $5 and $20.

b.

Paul must give up 4 units of A to obtain 1 unit of B.

c.

Paul's budget could be $20 and the market prices of A and B could be respectively $1 and $4.

d.

The relative price of A in terms of B is 4.

e.

Paul can definitely buy a basket with 5 units of A and 2 units of B.

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If the quantity demanded of a product X increases from 15 to 20 when, ceteris paribus, the price of a product Y increases from $400 to $450, then it is possible to say that the demands for X and Y are complementary.

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Consider a country that produces two final goods: X and Y. In year 1, this country produced the quantities Q_X,1and Q_Y,1of X and Y at prices P_X,1and P_Y,1. In year 2, the same country produced the quantities Q_X,2and Q_Y,2of X and Y at prices P_X,2and P_Y,2. If year 1 is set as the base year, what should be the value of P for year 2 according to the Laspeyres's method?

a.

(P_X,2 Q_X,2+ P_Y,2 Q_Y,2)/(P_X,1 Q_X,2+ P_Y,1 Q_Y,2).

b.

(P_X,1 Q_X,1+ P_Y,1 Q_Y,1)/(P_X,2 Q_X,1+ P_Y,2 Q_Y,1).

c.

None of the alternatives is correct.

d.

(P_X,1 Q_X,2+ P_Y,1 Q_Y,2)/(P_X,1 Q_X,1+ P_Y,1 Q_Y,1).

e.

(P_X,2 Q_X,1+ P_Y,2 Q_Y,1)/(P_X,1 Q_X,1+ P_Y,1 Q_Y,1).

0:56:32

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Regarding unemployment, it is correct to say that:

a.

Discouraged individuals are those officially in the labor force who are unemployed because they have lost hope of finding a paid job.

b.

None of the alternatives is correct.

c.

Full employment does not mean zero unemployment rate.

d.

Hispanic or Latino unemployment is persistently higher than unemployment across all other races and ethnicities in the United States.

e.

The unemployment rate is the percentage of the total adult population without jobs.

0:56:11

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The natural unemployment rate is composed by the frictional unemployment rate and the structural unemployment rate.

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False

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Regarding international trade, which statement is correct?

a.

None of the alternatives is correct.

b.

Regional trade agreements have nothing to do with protectionism.

c.

International trade tends to decrease the average level of wages in the economy.

d.

Protectionism only affects jobs in the specific industry being protected.

e.

International trade does not have income distribution effects.

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Countries A and B both produce books and toys. One worker in A can produce 6 books or 5 toys per day. One worker in B can produce 3 books or 2 toys per day. In relation to international trade between these two countries, what would the classical economist David Ricardo suggest to country A?

a.

Country A should specialize in the production and export of books to B in exchange for toys from B.

b.

None of the alternatives is correct.

c.

Country A should specialize in the production and export of toys to B in exchange for books from B.

d.

Country A should produce and export both goods to B.

e.

Country A should produce both goods and not trade with B.

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The Laspeyres price index tends to overstate price increases.

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False

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An increase in energy prices tends to shift the labor demand curve to the left.

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False

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Regarding the concept of price-elasticity, which statement is correct?

a.

Price-elasticities tend to decrease in the long run.

b.

When supply is more price elastic than demand, buyers bear most of the tax burden.

c.

None of the alternatives is correct.

d.

A linear demand implies that consumers become more sensitive to price as the price decreases.

e.

A decrease in the price of a product can lead to an increase in the producer's revenue if the demand for that product is price inelastic.

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Producer surplus is not the same as profit.

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A price floor set below the equilibrium price is nonbinding.

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False