Final Exam Review When individuals and businesses are permitted to trade freely over a larger market area They will be able to produce a larger output and consume a more diverse bundle of goods Inflation In the long run the primary effect of rapid monetary growth is Which of the following is a driving force underlying economic growth Entrepreneurial discovery and production of improved products Country A Size Three tenths the size of the US Population about 40 million Has lots of resources Country is poor A legal system that protects private property and enforces contracts in an even handed manner helps promote economic growth because it Provides people with strong incentive to supply goods for others If the Fed sells bonds to member banks what happens to reserves and the money supply Both decrease If equilibrium is present in the foreign exchange market and a nation is experiencing a trade surplus The nation must be experiencing a net capital outflow The law of comparative advantage explains why a nation will benefit from trade when It exports a lower opportunity cost and imports for a higher opportunity cost Which of the following would be expected if the tariff on foreign produced clothing was increased The supply of foreign clothing would decline Trade restrictions that limit the sale of low price foreign goods in the US market The argument that import restrictions save jobs and promote prosperity fails to recognize that Us imports provide people in other countries purchasing power When economists say the quantity demanded of a product has decreased they mea the Price of the product has risen and consequently consumers are buying less of it Of there is a decrease in demand for football jerseys we would expect Both the price and quantity sold to decrease Which of the following would reduce the price of IPhones and increase the quantity sold An increase in the supply of iPhones When the residents of a nation are free to trade with foreigners domestic producers will be able to Supply a larger quantity of goods they can produce at a relatively low cost If the government raises the tax rate workers get to keep Less of each additional dollar they earn so work effort decreases and aggregate supply increase Suppose in dollar terms nominal GDP increased approximately 4 percent during a given year and real GDP decreased 1 percent Which of the following best explains these events Prices increased approximately 5 percent Leslie is a stay at home mom Last week she was busy with her normal household chores She is Not a member of the labor force On average countries that have larger degree of economic freedom ten d to have Both higher per capita income levels According to non Keynesians how will an increase in government spending financed by borrowing during a recession affect recovery Higher future taxes and interest rates will be required to finance the larger debyt and this will weaken the recovery Which of the following is a positive effect of a job search and the unemployment hat often accompanies it It permits individuals to better match their skills with jobs that better suit them Full employment is the situation in which the economy operates at an unemployment rate equal to the sum of Structural and frictional unemployment Actual GDP will be greater than potential GDP During and economic boom Suppose you received a 4 percent increase in your nominal wage Over a year inflation ran about 6 percent Which of the following is true Although your nominal wage rose your real wage decreased Other things constant an increase in resource prices will Increase the cost of producing goods and services which will lead to a higher price level
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