AP Mid-Term Team Competition

To be able to produce more of something with the same amount of resources means you have a(n) ________ advantage.
A) Absolute B) Comparative

To be able to produce something at a lower opportunity cost means you have a(n) __________ advantage.
A) Absolute B) Comparative

You can have the __________ advantage in everything, but you cant have the _________ in everything.
A) Absolute, Comparative B) Comparative, Absolute

A person or country should specialize in producing what they have a(n) __________ advantage in producing, and trade.
A) Absolute B) Comparative

What is USAs opportunity cost of 1 computer?

Maximum that can be produced of each.

A) 1/3 wheat B) 3 wheat C) 1/3 computer D) 3 computers

Comput Wheat ers

USA
500 Kenya 200 1000 1500

Which country has the comparative advantage in hammers?

Country As opp. cost of 1 hammer=100 nails Country Bs opp. cost of 1 hammer=200 nails

A) Country A B) Country B

Which country has the comparative advantage in hamster wheels?

Country As opp. cost 1 hamster wheel = hamster Country Bs opp. cost 1 hamster wheel=3/5 hamster

A) Country A B) Country B

Which country has the comparative advantage in hamsters?

Country As opp. cost 1 hamster wheel = hamster Country Bs opp. cost 1 hamster wheel=3/5 hamster

A) Country A B) Country B

Which country has the comparative advantage in cranes?

Country As opp. cost 1 crane = 1,000 bungee cords Country Bs opp. cost 1 crane = 10,000 bungee cords A) Country A B) Country B

Which country has the comparative advantage in bungee cords?

Country As opp. cost 1 crane = 1,000 bungee cords Country Bs opp. cost 1 crane = 10,000 bungee cords A) Country A B) Country B

Which country has the lowest opportunity cost in the production of computers?
Maximum that can be produced of each.

A) Kenya B) USA

Comput Wheat ers

USA
500 Kenya 200 1000 1500

Which country has the comparative advantage in computers?

Maximum that can be produced of each.

A) Kenya B) USA

Comput Wheat ers

USA
500 Kenya 200 1000 1500

Which country should specialize in wheat?

Maximum that can be produced of each.

A) Kenya B) USA

Comput Wheat ers

USA
500 Kenya 200 1000 1500

Who has a comparative advantage in stereos, and who has a comparative advantage in bling?

Stereos
A) Rio -Both B) Morocco -Both C) Rio, Morocco D) Morocco, Rio

Bling

Rio

50

50

Morocco 20

40

GDP means the same thing as:

A) nominal GDP B) real GDP C) national income D) A & B E) A & C

When Real GDP increases

A) nominal GDP always increases too. B) nominal GDP always falls. C) nominal GDP may rise or fall. D) nominal GDP stays constant.

If the price level fell but nominal GDP stayed the same from year one to year two, then real GDP must have
A) risen B) also fallen C) stayed constant D) not enough info

Which of the following people would be considered unemployed?

A) A person who quits work to care for aging parents B) A person who stayed home to raise his children and now starts looking for a job C) A person who quits a job to return to school full time D) A person who is qualified to teach but is driving a bus until a teaching job is available E) A person who works two part-time jobs but is looking for a full-time job

 Assuming the total population is 100 million, the civilian labor force is 50 million and 47 million workers are employed, the unemployment rate:
a) is 3% b) is 6% c) is 7% d) is 9% e) can not be determined

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are:
a. counted as neither unemployed nor part of the labor force. b. treated as part time workers. c. included as part of the labor force but not as unemployed. d. counted as employed.

Which of the following will be counted as unemployed?

(A) Persons who quit their previous jobs to stay at home to care for sick parents (B) Persons who were laid off from their previous jobs and have not applied for a job in two years (C) Persons who were fired from their previous jobs and are actively applying for work (D) Persons who have given up looking for jobs after long searches (E) Persons who quit their previous jobs to start their own businesses

Inflation hurts

A) lenders at fixed rates. B) borrowers at fixed rates. C) lenders at adjustable rates.

Inflation helps

A) lenders at fixed rates. B) borrowers at fixed rates.

In order to protect themselves in case of unanticipated inflation, lenders often

A) make adjustable-rate loans. B) make fixed-rate loans.

Who is hurt MOST by unanticipated inflation?

A) lenders at a fixed rate of interest B) borrowers at a fixed rate of interest C) workers who get a yearly cost-of-living raise D) someone holding a lot of gold

Of the following groups, the one hurt the LEAST by unanticipated inflation is
A workers who have cost-of-living adjustments in their labor contracts B people who have saved money in accounts with a fixed interest rate C banks that have made long term, fixed rate mortgage loans D consumers who buy goods and services at prevailing market prices

 A) nominal pay rose and her purchasing power rose. B) nominal pay rose and her purchasing power fell. C) nominal pay fell and her purchasing power rose. D) nominal pay fell and her purchasing power fell.

Sue got a 10% raise at work this year, & the rate of inflation was 12%. Sues

The value of a price index in 2000 was 172. What was the value of that price index in its base year?
A) 72 B) 100 C) 136 D) 152

The value of a price index in 2000 was 172. What was the rate of inflation between the base year and 2000?
A) 72% B) 100% C) 136% D) 152%

The Consumer Price Index (CPI) is an indicator of which of the following?

A B C D

the size of an economy the velocity of money the level of inflation or deflation the presence of a budget deficit or surplus

If one wanted to know whether there had been inflation or not, the BEST measure to observe would be the
A. GDP. B. business cycle. C. CPI. D. national debt

1) Joe loses his job because of the recession. Which type of unemployment is it??
A) frictional B) cyclical C) structural

2) Sally loses her job because computers make it obsolete. Which type of unemployment is it??
A) frictional B) cyclical C) structural

3) Jason loses his job because he spit in his bosses face. Which type of unemployment is it??
A) frictional B) cyclical C) structural

4) Suppose that Peggy, a recent college graduate, decides to look for a job instead of going to graduate school. If she is unable to find a job that suits her interests right away, what type of unemployment is she MOST LIKELY experiencing?
A structural B seasonal C frictional D cyclical

5) What problem might policymakers be trying to address MOST if they increase funding for training programs covering skills such as computer repair, programming, and networking?
A frictional unemployment B structural unemployment C cyclical unemployment D seasonal unemployment

6) Is it counted & where?? A haircut from Regis Salon at the mall.

A) Yes, consumption B) Yes, investment C) Yes, government D) Not counted

7) Is it counted & where?? The purchase of the scissors used to cut your hair.
A) Yes, consumption B) Yes, investment C) Yes, government D) Not counted

8) Is it counted & where?? A haircut Mom gave you.

A) Yes, consumption B) Yes, investment C) Yes, government D) Not counted

9) When Mr. Cook buys his Ferrari

A) GDP & consumption will both rise. B) Consumption & imports will rise, GDP will stay the same. C) Consumption & exports will rise, GDP will stay the same. D) Imports will rise, GDP will fall. E) GDP will stay the same, and no sectors will be affected.

Maximum amount each could produce.

Food

Clothes

Northland

100

100

Southland

400

200

1. Northlands O.C. 1 Food = __________ 2. Southlands O.C. 1 Food = __________ 3. Comparative Advantage Food = _______ 4. __________ should specialize in food. 5. __________ should specialize in clothes.

One sheet of paper per group.

Jill Pat

Min/Song 30 50

Min/Meal 10 25

1) Who has absolute advantage in each? 2) Whats Jills opportunity cost of 1 song? 3) Whats Pats opportunity cost of 1 song? 4) Whats Jills opportunity cost of 1 meal? 5) Whats Pats opportunity cost of 1 meal? 6) Who has the comparative advantage in songs? 7) Who has the comparative advantage in meals? 8) What are the terms of trade for 1 song?

Country A Country B

Fish 10 labor-hours 20 labor-hours

Wheat 20 labor-hours 60 labor-hours

1) Absolute Fish? 2) Absolute Wheat? 3) Comparative Fish? 4) Comparative Wheat? 5) Who should specialize in Fish? 6) Who should import Wheat?

One sheet of paper per group.

Jim Pam

Songs 10 15

Meals 5 10

1) Who has absolute advantage in each? 2) Whats Jims opportunity cost of 1 song? 3) Whats Pams opportunity cost of 1 song? 4) Whats Jims opportunity cost of 1 meal? 5) Whats Pams opportunity cost of 1 meal? 6) Who has the comparative advantage in songs? 7) Who has the comparative advantage in meals? 8) Graph it!

Constructing a Price Index-Continued

Price index =
(selected basket price/ base yr. basket price)X100 The base-year price index always = 100!

Inflation = % change in price index, [(new-old)/old]

Constructing a Price Index-Continued

Example: The country of Spamelot only makes Spam and crackers. 1960 2010 P Spam 0.40 1.20 P Crackers 0.60 1.80 Mkt Basket P ____ ____ P Index (base year 1960) 100 ____ Inflation from 1960-2010 _____

Measuring Unemployment

# unemployed (must be looking) civilian labor force

civilian means not military labor force = employed + unemployed

(all the people either working or looking for work)

Gross Domestic Product

$ value of all final goods/services made in our country, in 12 months Not included: Nonmarket transactions (illegal) Intermediate products Secondhand sales Transfer payments Asset purchases (stocks, mergers, loans)

Year 3 = base year.

Year Units of Output P. per Unit GDP RGDP 1 9 $2 2 11 $3 3 14 $4 4 19 $5 5 21 $6

Formula Quiz
1) C=$5, I=$2, G=$3, M=$4, GDP=$8. What is X? 2) Market Basket Price (Base Year)=$20. Market Basket Price (Year 2)=$25. Whats the value of the price index in year 2? 3) Price index Year A: 200 Price index Year B: 250 --Inflation between Years A&B? 4) Frictional U. is 4%. Natural Rate of U. is 7%. What is the Structural Rate of U? 5) Real interest rate was 3%. Inflation was 8%. What was nominal interest rate? 6) MPS is 0.2. What is the tax multiplier?

MPS=0.25
Whats the maximum possible effect on GDP/AD if: 11) G increases $2 billion? 12) Tax cut $3 billion? 13) Tax increase $4 billion? 14) G increase $2b, tax decrease $2b? 15) G increase $2b, tax increase $2b? 16) G increase $5b, tax increase $5b?

Expenditure Model and AD

AD consists of C+I+G+(X-M) Anything that changes C, I, G, or (X-M) shifts AD.
PL

AD RGDP

 Expectations
Consumer Producer Prices

(Other) AD Shifters

Wealth Debt Fiscal Policy

Taxes Spending

Monetary Policy
Money Supply Interest Rates

SRAS shifters
Input costs
Commodities Wages

Productivity Business Taxes

Wait, arent taxes a demand shifter?????

LRAS shifters
When LRAS shifts right, this is called: What causes ec. growth?
Amount of _________
-

Quality of _________ (i.e. education) T____________