You have the following information for goods X and Y: Goods Price elasticity Cross-price elasticity Income elasticity X 0.4 -0.7 -1.8 Y 0.9 -0.7 0.6 Fill out the spaces in the following statements: Based on the price elasticity, we can say that good X is price ___________________ Based on the cross-price elasticity, we can say that goods X and Y are _______________ Based on the income elasticity, we can say that good Y is _________________

 

2.) Pure public goods are those supplied by the public sector and private goods are those supplied by the private sector.

3.) Nonrival goods may be provided by the private sector, but only if they are excludable.

All inferior goods must have been normal at some income level, but normal goods don’t necessarily ever have to be inferior. Explain

Lin spends her income on green goods (G) and born goods (B).  Her utility function is

Her marginal utility for green goods is

Her marginal utility for brown goods is

Find Lin's demand for brown goods expressed in terms of exogenous parameters

Exercise 3-3 (Algo) Schedules of Cost of Goods Manufactured and Cost of Goods Sold [LO3-3]

Primare Corporation has provided the following data concerning last month’s manufacturing operations.

Purchases of raw materials	$	32,000
Indirect materials used in production	$	4,930
Direct labor	$	58,300
Manufacturing overhead applied to work in process	$	88,200
Underapplied overhead	$	4,160

Inventories	Beginning		Ending
Raw materials	$	10,100	$	19,700
Work in process	$	55,100	$	68,300
Finished goods	$	33,200	$	42,900

Required:

1. Prepare a schedule of cost of goods manufactured for the month.

2. Prepare a schedule of cost of goods sold for the month. Assume the underapplied or overapplied overhead is closed to Cost of Goods Sold.

what factors affect buyers demand for goods?

what factors affect sellers supply of goods?

how do supply and demand determine the price of a good and the quantity sold?

Exercise 3-6 Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement [LO3-3]

The following data from the just completed year are taken from the accounting records of Mason Company:

Sales	$	657,000
Direct labor cost	$	85,000
Raw material purchases	$	131,000
Selling expenses	$	100,000
Administrative expenses	$	48,000
Manufacturing overhead applied to work in process	$	204,000
Actual manufacturing overhead costs	$	225,000

Inventories	Beginning		Ending
Raw materials	$	8,400	$	10,500
Work in process	$	5,500	$	20,400
Finished goods	$	71,000	$	25,500

Required:

1. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials.

2. Prepare a schedule of cost of goods sold. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold.

3. Prepare an income statement.

1. GDP includes

a. All final goods.

b. All final services.

c. Both final goods and final services.

2. Which of the following is counted in US GDP?

a. Used car purchased by a student for his commute to school

b. Used oven purchased by a baker for her cake shop

c. Drill purchased by a construction company

d. b & c only

e. None of the above

3. Which of the following is counted in US GDP?

a. A New video game made in China but purchased in the United States

b. New growth in rainforests

c. A new quilt made by Jane and given to her grandmother for her 80th birthday

d. a & c only

e. None of the above

4. Real GDP controls for

a. changes in preferences.

b. changes in population.

c. changes in prices.

d. a & c only

e. a, b, & c

5. True or false: nominal GDP is always larger than real GDP.

a. True

b. False

6. True or false: real GDP is always larger than real GDP per capita.

a. True

b. False

7. True or false: if a country’s nominal GDP increases, it means the country is producing more goods and services.

a. True

b. False

8. Real GDP per capita in the US ____________ during the great recession of 2009.

a. increased

b. decreased

c. did not change

9. Real GDP per capita is positively correlated with all of the following except

a. malaria cases per capita.

b. life expectancy.

c. happiness.

d. education.

e. b & d only

f. a, b, c, & d

10. Real GDP per capita is usually used to compare the standard of living of

a. the same country at different points in time.

b. two different individuals at one point in time.

c. two different countries at one point in time.

d. a & c only.

e. None of the above.

11. True or False: Government purchases includes all of the following: social security payments, government employee wages, and tanks purchased by the government.

a. True

b. False

12. Measuring GDP using the national spending approach includes

a. Consumption.

b. Net exports.

c. Government spending.

d. a & b only

e. a, b, c

13. Measuring GDP using the factor income approach includes

a. Employee compensation.

b. Interest.

c. Profit.

d. b & c only

e. a, b, c

14. Which job is least likely to be negatively affected by increases in global markets and technology?

a. Plumber

b. Uber driver

c. Umpire

d. Factory worker

15. What percent of jobs in the US require some form of occupational licensing?

a. 15%

b. 25%

c. 40%

d. 50%

e. none of the above

16. Which of the following individuals are counted as unemployed?

a. A military soldier.

b. An adult who is out of work, wants a job, and applied to a job 2 weeks ago but not since then.

c. An adult in prison.

d. An adult who is out of work, wants a job, and applied to a job 5 weeks ago but not since then.

e. a and b only.

f. b and d only.

17. Complete the following equation: Unemployment Rate = (Unemployed/ ______________)*100

a. Employed

b. Labor Force

c. US adult population

d. US population

e. None of the above.

18. Since 1950, in which year was the unemployment rate 0%?

a. 1953

b. 1969

c. 1994

d. a and b only.

e. It’s never been 0%

19. Calculate the unemployment rate with the following data: Unemployed: 10 million, US Population: 200 million, Employed: 90 million

a. 3%

b. 5%

c. 8%

d. 10%

20. According to the video, the average unemployment rate between 1950 and 2015 was approximately

a. 0%

b. 3%

c. 6%

d. 8.5%

e. None of the above.

21. The official unemployment rate definition is

a. An adult out of work who has been looking for work in the past year.

b. An adult who is out of work and has been looking for work in the past 15 weeks.

c. An adult who is out of work and has been looking for work in the past 4 weeks.

d. An adult who is out of

22. Discouraged workers are unemployed individuals who say they want a job, but although they haven’t looked for work in the past ________ , they have looked in the past ________.

a. 4 weeks, 15 weeks

b. 4 weeks, year

c. 15 weeks, year

d. 2 weeks, 15 weeks

23. If we include discouraged workers as unemployed when calculating the unemployment rate,

a. Stays the same.

b. Doubles.

c. More than doubles.

d. Less than doubles.

24. True or false. It would be very beneficial for the US economy if we could greatly reduce or eliminate frictional unemployment.

a. True

b. False

25. If the news reported that 100,000 “new” jobs were created and there were 1,000,000 job separations in the United States in July 2016, how many new hires occurred in the US that month?

a. 100,000

b. 900,000

c. 1,000,000

d. 1,100,000

e. 1,500,000

25. In the above scenario, how many jobs are created for every job destroyed?

a. .1

b. .9

c. 1

d. 1.1

e. 1.5

26. Which of the following is a major cause of structural unemployment?

a. Short-term unemployment caused by college graduates searching for employment.

b. Large and long-lasting shocks to the economy.

c. Decreases in labor force participation amongst older workers.

d. a and b only.

27. Cyclical unemployment is defined as:

a. The amount of workers who have given up looking for work but would still take a job if it paid enough.

b. The natural rate of unemployment.

c. Unemployment correlated with business fluctuations.

d. Short-term unemployment caused by the difficulty of matching employees to open positions.

e. Persistent, long-term unemployment caused by long-lasting shocks to the economy.

28. Which of the following contribute to why wages are considered sticky?

a. People get upset when wages fall, particularly if they think their employer is causing the wage cut, which negatively impacts workplace morale.

b. If wages were easily cut, workers might respond by working less or disrupting their work, thus negatively affecting productivity.

c. Minimum wage requirements make it difficult to lower wages quickly or often.

d. All of the above.

29. The natural rate of unemployment is defined as:

a. Frictional plus structural unemployment.

b. Cyclical plus frictional unemployment.

c. Cyclical unemployment.

d. The rate at which workers retire from the labor force.

e. Structural unemployment plus the rate at which domestic jobs are replaced by outsourcing skills internationally.

Gross Domestic Product (GDP)

• Definition

•   Calculation – Expenditure and income approaches

•   Final goods versus intermediate goods

•   Are used goods counted in GDP?

•   Are stocks and bonds (financial assets) counted in GDP?

•   How are inventories treated in GDP?

•   Calculation of real GDP & current GDP

•   Definition of the standard of living

•    Limitations of GDP per person as a measure of the standard of living – e.g., is household production included in GDP? What about underground economic activity? What about leisure and environmental quality?

In an IS-LM model with fixed exchange rates and perfect capital mobility, a cut in government spending shifts the IS-curve to the left

Select one:
a. but then the central bank is forced to restrict the money supply, so the LM-curve also shifts to the left
b. but then back to the right again because of the resulting increase in net exports
c. but then the central bank is forced to expand money supply, so the LM-curve shifts to the right
d. without affecting the LM-curve
e. but then a capital inflow from abroad results, forcing the government to reverse its policy

If capital is perfectly mobile internationally, then

Select one:
a. significant differences in interest rates across countries can persist over a long time
b. one country's interest rates can be substantially higher than the world interest rate over the long run
c. an increase in U.S. interest rates will worsen the U.S. balance of payments since U.S. banks are more willing to lend internationally
d. countries with interest rates much lower than in the rest of the world will experience an outflow of capital
e. countries with interest rates higher than in the rest of the world will experience an outflow of capital

Contractionary monetary policy in the U.S.

Select one:
a. raises U.S. interest rates and lowers U.S. GDP
b. decreases the value of the dollar relative to other currencies
c. increases U.S. net exports
d. raises U.S. interest rates and raises U.S. GDP
e. decreases U.S. interest rates and lowers U.S. GDP

A beggar-thy-neighbor policy is a policy that

Select one:
a. is intended to appreciate a country's currency and stimulate demand for foreign goods
b. combines export subsidies with cuts in corporate income taxes
c. uses fiscal expansion in an effort to increase net exports, output, and employment
d. creates domestic employment at the expense of other countries
e. uses monetary restriction to raise interest rates in an effort to attract foreign capital

If a country has a balance-of-payments surplus, we know for sure that

Select one:
a. the sum of the current and capital accounts shows a surplus
b. net exports are positive
c. the current account shows a surplus
d. the capital account shows a surplus
e. the sum of the current and capital accounts shows a deficit

Which of the following is FALSE?

Select one:
a. a rise in foreign income always improves a country’s trade balance and leads to an increase in aggregate demand
b. a decrease in exports leads to lower interest rates and a currency depreciation
c. an increase in domestic income worsens a country's trade balance since it increases spending on imports
d. a rise in domestic interest rates improves a country's trade balance since it decreases imports
e. an exchange rate depreciation improves a country’s trade balance and thus increases aggregate demand

If the real exchange rate is equal to 1,

Select one:
a. the relative demand for domestically produced goods will rise
b. net exports is equal to zero
c. foreign investors will try to buy more domestic assets
d. the relative demand for domestically produced goods will fall
e. currencies are at purchasing power parity

In which exchange rate system do central banks always stand ready to buy and sell their currency at a predetermined price?

Select one:
a. a fixed exchange rate system
b. a dirty floating exchange rate system
c. a flexible exchange rate system
d. a floating exchange rate system
e. a managed exchange rate system

Assume the Japanese yen has appreciated relative to the U.S. dollar. Which of the following is true?

Select one:
a. each yen can now buy more dollars
b. each dollar can now buy more yen
c. the Japanese central bank is forced to buy pounds.
d. the Japanese central bank is forced to sell dollars
e. each dollar can now buy more Japanese goods

Our country’s net exports will increase if

Select one:
a. there is an increase in domestic income
b. domestic interest rates rise due to expansionary fiscal policy
c. many of our trade partners experience inflation
d. there is an increase in domestic inflation
e. there is a decrease in the real exchange rate

In an IS-LM model with flexible exchange rates and perfect capital mobility, a restriction in money supply will

Select one:
a. decrease both the level of output and the interest rate but only temporarily
b. shift the IS-curve first to the right and then back to the left as the central bank is forced to buy foreign currency reserves
c. shift the LM-curve first to the left and then back to the right as the central bank is forced to buy foreign currency reserves
d. decrease the level of output permanently but increase the interest rate only temporarily
e. temporarily decrease the level of output and temporarily increase the interest rate

If exchange rates are determined in the foreign exchange market, they are never

Select one:
a. flexible
b. managed
c. floating
d. influenced by actions of the central bank
e. fixed

If the exchange rate is above the equilibrium level then in a floating exchange rate system:

Select one:
a. There is excess demand and the exchange rate should fall
b. There is excess supply and the exchange rate should rise
c. There is excess demand and the exchange rate should rise
d. There is excess supply and the exchange rate should fall
e. There is excess demand and the exchange rate should be constant