ECON 1100 – Global Economics (Section 05) Exam #2 – Summer 2011 (Version B) – Answer Key 1. The Gini-Coefficient provides a quantitative measure of A. income equality/inequality within a society. 2. During the past six decades, inflation rates in the U.S. (reported on an annual basis) were D. relatively low from 1949 through 1967, then relatively high from 1968 through 1982, and finally relatively low from 1983 through 2010. 3. Bobby owns a one of a kind “Kitty Karry-All” doll. His reservation price as a seller of this item is $20. Cindy’s reservation price as a buyer of this item is $120. If Bobby sells this doll to Cindy, the resulting Social Surplus would be equal to B. $100. 4. _____________________ refers to the production of goods and services, valued in each period according to current period prices. A. Nominal GDP 5. The present economic system of Germany would be most accurately described as A. a Mixed Economy. 6. Suppose that between 2012 and 2015 the Unemployment Rate in Japan decreased from 9.6% to 8.1% while the inflation rate increased from 1.1% to 3.4%. It follows that the value of the Misery Index in Japan in 2015 would be ______________________ the value of the Misery Index in Japan in 2012. A. greater than 7. Demand D. More than one (perhaps all) of the above answers is correct. 8. Which of the following is a basic characteristic of Capitalism? A. Factors of production are privately owned and operated for a profit. 9. Focusing on the “household at the 40th Percentile of earned income” in the United States, over the past three decades the “real income” of the household at this cutoff level A. increased from $41,950 to $45,207 between 1980 and 1989, and then further increased to $49,510 by 2007.10. When purchasing a new car last year, Ralph chose to buy a hybrid vehicle partly because doing so gave him an income tax credit which reduced his state income taxes by $1,000. This observation illustrates how the behavior of an individual can be influenced by C. a material incentive. 11. The Phillips Curve D. illustrates the short term tradeoff between unemployment and inflation that an economy faces. 12. The “outward shift” of the PPC (from “1987 PPC” to “2011 PPC”) which occurred between 1987 and 2011 could be best described as C. Economic Growth. 13. If this society had instead chosen “Point B” in 1987, then the relevant PPC in 2011 would A. lie somewhere below the curve labeled “2011 PPC” (i.e., be closer to the origin than the curve labeled “2011 PPC”). 14. __________________ is the subfield of economics that compares the structure and performance of different types of economic organization. C. Comparative Economic Systems 15. Suppose that the Lorenz Curve for Brazil in 2011 lies completely below the Lorenz Curve for Germany in 2011. This implies that C. incomes are distributed more equally in Germany than in Brazil. 16. Which of the following demonstrates the “Law of Demand”? D. Joan chooses to buy fewer donuts at $8.50 per dozen than she chooses to buy at $7.50 per dozen. 17. Suppose that “County X” were to realize a constant Real GDP Growth Rate of 2% per year. It follows that Real GDP would double A. in roughly 35 years. 18. Under “Indicative Planning” C. the government relies upon the voluntary response of the private sector to a set of guidelines jointly formulated by government, industry, and labor. 19. Adam Smith was A. an 18th century Scottish economist. 20. Total Social Surplus C. is generally equal to the sum of Total Consumers’ Surplus and Total Producers’ Surplus.21. Which of the following countries experienced an annual inflation rate of roughly 12,563% in 2008? B. Zimbabwe. 22. __________________ refers to “attempts to convince individuals to behave in a certain manner because doing so is the right thing to do.” B. Moral Persuasion 23. In a free market, the equilibrium price and equilibrium quantity of trade are determined by C. the behavior of both the buyers and the sellers in the market. 24. Per Capita GDP in the United States as a whole is approximately A. $46,000, greater than the Per Capita GDP (PPP) of approximately $32,900 for the European Union as a whole. 25. Consider a market in which there is currently “Inefficiency from too much trade.” This observation suggests that A. we are trading some units for which buyer’s reservation price is less than seller’s reservation price. 26. In which of the following countries do individuals enjoy the greatest amount of Economic Freedom? C. Hong Kong. 27. In this market there would be ____________ at a price of $9.95. C. excess demand 28. If 850 units were traded, Deadweight-Loss would be A. positive, but less than “area (a).” 29. In equilibrium C. 760 pizzas are purchased/sold. 30. Suppose that in 2004, the value of the Gini-Coefficient in the United States was 0.48, while the value of the Gini-Coefficient in Sweden was 0.24. These values directly suggest that in 2004 B. incomes were distributed “more equally” in Sweden than in the United States. 31. Between 1980 and 2007 the “percentage of income earned by the Top 10% of households in the United States” A. increased from roughly 32.13% of society’s income to roughly 48.05% of society’s income.32. The World Bank is C. a lending agency which makes long-term low interest rate loans and provides technical assistance to Less Developed Countries. 33. _________________ refers to the skills, education, and training which individuals in the labor force possess. D. Human Capital 34. The _____________________ refers to the “trap” in which countries are poor because they cannot afford to save and invest, but they cannot easily save and invest because they are poor. D. Vicious Cycle of Poverty 35. The value of the “Misery Index” in the U.S. in March 2011 was C. 11.48, a value which is above the Post WW-II mean value of 9.45. 36. In order to include many different goods and services in a single aggregate measure, GDP is computed by weighting goods/services according to C. the market prices of the goods/services. 37. In 2007, Real GDP per capita in the United States was _________________ the value of Real GDP per capita in the United States in 1908. B. 7.9 times larger than 38. The economy of the “former Soviet Union” C. perhaps
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