ECON201 Midterm FY 2023 Summer Term PDF

SEU SEU SEU| ELITE | |ELITE ELITE - ‫المقرر‬ -- MIDTERM FY 2023 SUMMER TERM ECON201 SEU | ELITE ...

SEU SEU SEU| ELITE | |ELITE ELITE - ‫المقرر‬ -- MIDTERM FY 2023 SUMMER TERM ECON201 SEU | ELITE  SEU | ELITE - _________________ is the fall in total surplus that results from a market distortion such as a tax. The gross weight loss Tax revenue Tax loss The deadweight loss✅ Calculate the Consumer Surplus (CS) of A if the price (P) of a good is $260 and his willingness to pay (WTP) for that good is $300. $60 $40 ✅ $30 $50 Tick the correct statement. a tax on sellers shifts the Supply curve down by the amount of the tax. a tax on buyers shifts the Demand curve up by the amount of the tax. a tax on sellers shifts the Supply curve up by the amount of the tax. ✅ a tax on sellers will not have any impact on the Supply curve. What will be the quantity demanded by the market at a price of $9 if the quantities demanded by A and B at the same price are 10 and 5 pizzas supposing that A and B are the only two buyers in this pizza market? 12 18 15 ✅ 10 ______ has an has an __in wheat if, producing a ton of wheat uses 10 labor hours in the U.S. vs 25 in Japan. Japan, absolute advantage U.S., absolute advantage✅ Japan, comparative advantage U.S., comparative advantage  SEU | ELITE - A visual model of the economy that shows how dollars flow through markets among households and firms is known as Production Possibilities Diagram The Dollar Flow Diagram The Circular Flow Diagram✅ Laffer Curve A graph that shows the combinations of two goods the economy can possibly produce given the available resources are fully employed and efficiently used is called as Procurement Possibilities Frontier Production Combinations Frontier Production Possibilities Frontier✅ Procurement Combinations Frontier ________ is the term that is used for the resources the economy uses to produce goods & services. Factors of production✅ Resources of production Productive resources Capital resources The amount of goods and services produced per unit of labor is called as Productivity✅ Efficiency Scarcity Import Quota The limited nature of society’s resources is called as economics tradeoff scarcity✅ necessity  SEU | ELITE - A) What is tariff? Tariff is a tax on imported goods. B) What is its impact on Consumer surplus and Producer surplus? Tariffs impact consumer and producer surplus depending on market circumstances and magnitude. They decrease consumer surplus by increasing the cost of imported goods, reducing demand and price. They also increase producer surplus for domestic producers, but at the expense of consumers, who pay more for goods. C) List any three arguments for restricting trade. The jobs argument : Trade destroys jobs in industries that compete with imports - The national security argument : An industry vital to national security should be protected from foreign competition, to prevent dependence on imports that could be disrupted during wartime - The infant-industry argument : A new industry argues for temporary protection until it is mature and can compete with foreign firms - The unfair-competition argument ‫؛‬Producers argue their competitors in another country have an unfair advantage, e.g. due to govt subsidies - The protection-as-bargaining-chip argument Compute the GDP Deflator in 2023 using the data provided in the table below Answer : A. Compute nominal GDP in 2021. $30 x 900 + $100 × 192 = $46.200 B. Compute real GDP in 2022. $30 x 1000 + $100 × 200 = $50.000 C. Compute the GDP deflator in 2023. Nom GDP = $36 x 1050 + $100 × 205 = $58.300 Real GDP = $30 x 1050 + $100 × 205 = $52,000 GDP deflator = 100 x (Nom GDP/(Real GDP) = 100 × ($58,300/($52,000) = 112.1  SEU | ELITE - Calculate the CPI inflation rate from 2021-2022 using the data given below: Ans For 2021: Cost of basket = ($11 x 4) + ($2.5 x 10) = $44 + $25 = $69 For 2022: Cost of basket = ($12 x 4) + ($3 x 10) = $48 + $30 = $78 Next, we need to calculate the CPI for 2021 and 2022, using the base year of 2020: CPI for 2021 = (Cost of basket in 2021 / Cost of basket in 2020) x 100 = ($69 / $60) x 100 = 115 CPI for 2022 = (Cost of basket in 2022 / Cost of basket in 2020) x 100 = ($78 / $60) x 100 = 130 Finally, we can calculate the inflation rate between 2021 and 2022 as follows: Inflation rate = ((CPI in 2022 - CPI in 2021) / CPI in 2021 = 130-115/115 = 13.04%  SEU SEU SEU | |ELITE | ELITEELITE -- - ‫المقرر‬ MID THIRD SEMESTER 2023 ECON201 SEU | ELITE  SEU | ELITE - 1. Define opportunity cost. What is the opportunity cost to you of attending college? Answer: Whatever must be given up to obtain some item it its opportunity cost. Basically, this would be a person's second choice. The opportunity cost of a person attending college is the value of the best alternative use of that person's time, as well as the additional costs the person incurs by making the choice to attend college. For most students this would be the income the student gives up by not working plus the cost of tuition and books, and any other costs they incur by attending college that they would not incur if they chose not to attend college. A student's opportunity cost of coming to class was the value of the best opportunity the student gave up. (For most students, that seems to be sleep.) 2. Explain Law of Demand? Answer Law of demand: the claim that the quantity demanded of a good falls when the price of the good rises, other things equal 3. A movement downward and to the right along a demand curve is called a(n) a. decrease in quantity demanded. b. increase in quantity demanded.✅ c. increase in demand. d. decrease in demand.  SEU | ELITE - 4. Answer A. Compute nominal GDP in 2011. $30 x 900 + $100 x 192 = $46,200 B. Compute real GDP in 2012. $30 x 1000 + $100 x 200 = $50,000 C. Compute the GDP deflator in 2013. Nom GDP = $36 x 1050 + $100 x 205 = $58,300 Real GDP = $30 x 1050 + $100 x 205 = $52,000 GDP deflator = 100 x (Nom GDP)/(Real GDP) = 100 x ($58,300)/($52,000) = 112.1  SEU | ELITE - 5. An economy’s production of two goods is efficient if a. it is impossible to produce more of one good without producing less of the other. ✅ b. the opportunity cost of producing more of one good is zero. c. the goods are produced using only some of society’s available resources. d. all members of society consume equal portions of the goods. 6. A production possibilities frontier is a straight line when a. the rate of tradeoff between the two goods being produced is constant. ✅ b. an economy is interdependent and engaged in trade instead of self-sufficient. c. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. d. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced. 7. Rational people make decisions at the margin by a. behaving in a random fashion. b. thinking in black-and-white terms. c. comparing marginal costs and marginal benefits. ✅ d. following marginal traditions. 8. The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that a. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs. b. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits. c. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. ✅ d. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. 9. On a graph, the area below a demand curve and above the price measures a. Deadweight loss. b. Producer surplus. c. Willingness to pay. d. Consumer surplus. ✅ 10. GDP is defined as the a. value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. b. value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. c. value of all final goods and services produced within a country in a given period of time. ✅ d. value of all goods and services produced within a country in a given period of time. 11. Price controls are usually enacted a. as a means of raising revenue for public purposes. b. when policymakers believe that the market price of a good or service is unfair to buyers or sellers.✅ c. when policymakers detect inefficiencies in a market. d. All of the above are correct. 12. Which of the following equations is valid? a. Total surplus = Amount received by sellers - Cost to sellers b. Producer surplus = Total surplus - Consumer surplus ✅ c. Total surplus = Value to buyers - Amount paid by buyers d. Consumer surplus = Total surplus - Cost to sellers 13. The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate? a. 7.2 percent b. 27.2 percent c. 6.0 percent ✅ d. 5.7 percent  SEU | ELITE – ECON201 MID SUMMER 2023 – ALTERNATIVE EXAM ECON201 SEU | ELITE  SEU | ELITE – ECON201 Q1. The invisible hand refers to : A. the marketplace guiding the self-interests of market participants into promoting general economic well-being. ✅ B. the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient. C. the equality that results from market forces allocating the goods produced in the market. D. the automatic maximization of consumer surplus in free markets. Q2. Which of the following equations is valid? A. Consumer surplus = Total surplus - Cost to sellers B. Producer surplus = Total surplus - Consumer surplus ✅ C. Total surplus = Value to buyers - Amount paid by buyers D. Total surplus = Amount received by sellers - Cost to sellers Q3. An economy’s production of two goods is efficient if A. all members of society consume equal portions of the goods. B. the goods are produced using only some of society’s available resources. C. it is impossible to produce more of one good without producing less of the other. ✅ D. the opportunity cost of producing more of one good is zero. Q4. A country has a comparative advantage in a product if the world price is A. lower than that country’s domestic price without trade. B. higher than that country’s domestic price without trade. ✅ C. equal to that country’s domestic price without trade. D. not subject to manipulation by organizations that govern international trade.  SEU | ELITE – ECON201 Q5. Efficiency means that A. society is conserving resources to save them for the future. B. society's goods and services are distributed equally among society's members. C. society's goods and services are distributed fairly, though not necessarily equally, among society's members. D. society is getting the maximum benefits from its scarce resources. ✅ Q6. A movement downward and to the right along a demand curve is called a(n) A. increase in demand. B. decrease in demand. C. decrease in quantity demanded. D. increase in quantity demanded ✅ Q7. The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate? A. 5.7 percent B. 6.0 percent ✅ C. 7.2 percent D. 27.2 percent Q8. The limited nature of society’s resources is called as A. necessity B. scarcity✅ C. economics D. tradeoff  SEU | ELITE – ECON201 Q9. GDP is defined as the: A. value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. B. value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. C. value of all final goods and services produced within a country in a given period of time. ✅ D. value of all goods and services produced within a country in a given period of time. Q10. If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, the total tax revenue received by the government can be expressed as A. T/Q B. T+Q C. TxQ ✅ D. (TxQ)/Q  SEU | ELITE – ECON201 ESSAY QUESTIONS Q11. What is the Consumer Price Index (CPI)? How is it calculated? Answer ✅ measures the typical consumer’s cost of living the basis of cost of living adjustments (COLAs) in many contracts and in Social Security How is it calculated : Fix the “basket.” The Bureau of Labor Statistics (BLS) surveys consumers to determine what’s in the typical consumer’s “shopping basket.” Find the prices. The BLS collects data on the prices of all the goods in the basket Compute the basket’s cost. Use the prices to compute the total cost of the basket Q12. What is the difference between a "change in demand" and a "change in quantity demanded?" Explain the determinants which shift the Demand Curve. Answer ✅ Change in demand refers to a shift in the entire demand curve, affecting the quantity of a good or service consumers are willing to buy at every price level. This is caused by factors like income, tastes, population demographics, and product prices. Change in quantity demanded, on the other hand, is a movement along the existing demand curve, caused by a change in the product's price. This leads to an inverse relationship between price and quantity demanded, known as the law of demand.  SEU | ELITE – ECON201 Q13. Compute the GDP deflator in 2019 using the data provided in the table. Use 2017 as the base year. [3 Marks] 2017 2018 2019 P Q P Q P Q Good A 40 800 42 900 45 1000 Good B 80 250 85 275 90 300 Answer ✅ To compute the GDP deflator, we need to first calculate the nominal GDP and real GDP for each year using 2017 as the base year. Nominal GDP = P x Q Real GDP = P(base year) x Q 2019: Nominal GDP = (45 x 1000) + (90 x 300) = 45,000 + 27,000 = 72,000 Real GDP = (40 x 1000) + (80 x 300) = 40,000 + 24,000 = 64,000 To find the GDP Deflator in 2019 and based on outcomes above , 2019: GDP deflator = (72,000 / 64,000) x 100 = 112.50  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 Consumer Price Index miss substitution because it uses: a. a fixed basket of goods. b. quantities purchased by a typical urban household. c. percentage change in the price level from one period to another. d. market prices. The Consumer Price Index measures: a. Money supply. b. GDP deflator. c. The typical consumers cost of living. d. Inflation. Tariff is a tax on a. Imports b. Exports c. Net Exports d. All of the above From the information given above, Choose the correct statement: a. Saudi Arabia has a higher opportunity cost. b. Saudi Arabia has an absolute advantage in coffee. c. Ethiopia has an absolute advantage in coffee. d. Ethiopia has a lower opportunity cost. In the graph bellow, what is the total surplus without tax : a. (A+B+C) b. (A+B+C+D+E+F) c. (A+B+D+F) d. (D+E+F) How the CPI Is Calculated: a. Fix the “basket.” , Find the prices , Compute the basket’s cost , Choose a base year and compute the index and Compute the inflation rate. b. Fix the “basket.” , Find the prices , Compute the basket’s cost and Choose a base year. c. Fix the “basket.” , Find the prices , Compute the basket’s cost ,and compute the index and Compute the inflation rate. d. None of the above The difference between real and nominal GDP is: a. Real GDP also includes services, whereas nominal GDP only takes goods into account. b. nominal GDP uses price-levels of some base year. c. nominal GDP only accounts for citizens. d. nominal GDP uses actual price-levels. ECON 201 - MIDTERM BLUE 72 pg. 1  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 Making decisions requires comparing the costs and benefits of alternative choices a. Efficiency b. Rational people c. Opportunity Cost d. Equality The subject for the study of Macroeconomics is: a. The Principle of Producer. b. None of the above c. The Principle of National Income. d. The Principle of Consumer. An investment by a firm from one country in a business that it controls in another country. a. foreign direct investment b. trade c. foreign portfolio investment d. Investment The __________ demand curve reflects the law of demand, which states that the quantity buyers demand of a good depends __________ on the good’s price. a. Upward-sloping, positively b. Downward-sloping, positively c. Downward-sloping, negatively d. Upward-sloping, negatively When a world price is lower than a domestic price, trade will _______ producer surplus but _______ consumer surplus a. Raises, raises. b. Lowers, raises. c. Lowers, raises. d. Raises, lowers. All of the following cause the CPI to measure more inflation than there really is, EXCEPT: a. substitution bias. b. introduction of new goods. c. the steady increase in the number of consumers. d. unmeasured quality change. The price elasticity of demand equals a. the change in the quantity demanded divided by the change in price. b. the change in the price divided by the change in quantity demanded c. the percentage change in the price divided by the percentage change in the quantity demanded. d. the percentage change in the quantity demanded divided by the percentage change in the price. ECON 201 - MIDTERM BLUE 72 pg. 2  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 With additional resources or an improvement in technology the PPF: a. will remain constant. b. shift outward (to the right). c. shift downward (to the left). d. Ambiguous, depending on other factors. Comparative advantage means being able to : a. produce a good with fewer inputs. b. produce a good at a lower opportunity cost. c. produce a good at a Lower explicit cost. d. produce a good with higher inputs. Comparative advantage means: a. being able to produce a good at a higher price. b. being able to produce a good at a lower opportunity cost. c. being able to produce a good at a lower transaction cost. d. being able to produce a good with fewer inputs. Macroeconomics is a study of economics that deals with which 4 major factors: a. households, firms, government, and demand-supply b. households, firms, government and external sector c. profits, price level, cost and expenditure d. none of the above If a rise in supply exceeds a rise in demand, then we should expect : a. The equilibrium price and quantity levels will decline. b. The equilibrium price will rise while the equilibrium quantity will decline. c. The equilibrium price will fall while the equilibrium quantity will rise. d. The equilibrium price and quantity levels will rise. Factors of production: a. labor, land, capital, and natural resources. b. labor, land, capital, rent, and natural resources. c. labor, land, capital, wages, rent, and natural resources. d. labor, land, capital, wages, and natural resources. Deposit $2,000 for one year. Nominal interest rate is 8%. During that year, inflation is 2.5%. Compute the real interest rate: a. 5.5% b. 2.5% c. 10.5% d. 8% ECON 201 - MIDTERM BLUE 72 pg. 3  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 The knowledge and skills workers acquire through education, training, and experience, refers to: a. Technological knowledge b. Human capital c. Natural resources d. physical capital Ahmed spends SR 2500 on a new laptop to use in his new publishing business In Saudi Arabia. The laptop was built in Japan a. GDP unchanged b. Consumption raises by SR 2500 c. Investment reduces by SR 2500 d. Net exports raise by SR 2500 Prices rise when the government increases the quantity of money. This statement is: a. Positive b. Normative c. Negative d. None of the above When countries specialize in the goods in which they have a __________________, the economic “pie” grows and trade can make everyone better off. a. Opportunity cost b. Absolute advantage c. Comparative advantage d. Comparative advantage and trade An increase in the size of a tax causes: a. the DWL to rise even more. b. producer surplus to increase. c. total surplus to raise. d. consumer surplus to increase. When a country allows trade and becomes an exporter of a good: a. Trade lowers producer surplus, consumer surplus and total surplus. b. Trade lowers producer surplus but raises consumer and total surplus. c. Trade raises producer surplus, reduces consumer surplus, and raises total surplus. d. Trade raises consumer surplus only. If Zahra purchase a new house on 2017 for 2 million SAR. Then she sold the house to Aisha for 1.5 million SAR on 2018. Then, Aisha sold the house to Ahmed on 2019 for 2.5 million SAR. Then: a. GDP will increase on 2017 by 2 million SAR and it will increase on 2019 by 2.5 million SAR b. GDP will increase only on 2019 by 2.5 million SAR ECON 201 - MIDTERM BLUE 72 pg. 4  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 c. GDP will increase on 2017 by 2 million SAR, rise on 2018 by 1.5 million SAR, and rise on 2019 by 2.5 million SAR. d. GDP will rise on 2017 by 2 million SAR and it will increase on 2019 by 0.5 million SAR. Real GDP is a measure of a country's: a. Economic transactions b. Money c. Wealth d. Physical output Free trade brings welfare gains from tariff removal and increased competition and efficiency. Example of: a. Inward-oriented policies b. Foreign direct investment c. Outward-oriented policies d. Growth Spending 300 SAR to eat dinner at restaurants on a weekend, in this case: a. Consumption and GDP rise by 300 SAR b. Consumption and GDP fall by 300 SAR c. Investment and GDP rise by 300 SAR d. Investment and GDP fall by 300 SAR The ability to produce a good using fewer inputs than another producer a. Absolute advantage b. Comparative Advantage c. Comparative advantage and trade d. Opportunity cost When quantity demanded is greater than quantity supplied, a. Sellers try to increase sales by cutting price. b. Prices continue to fall until market reaches equilibrium. c. There is an excess supply (Surplus). d. Sellers raise the price causing QD to fall and QS to rise. Substitution Bias, Introduction of New Goods, and Unmeasured Quality Change are problems causes the a. CPI to overstate cost of living remain the same. b. CPI to overstate cost of living zero c. CPI to overstate cost of living increases. d. CPI to overstate cost of living decreases. The Production Possibilities Frontier’s (PPF) curve might be: a. L- Shaped ECON 201 - MIDTERM BLUE 72 pg. 5  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 b. Bow-Shaped c. U- Shaped d. Diminishing Shaped For a given level of technology, we should expect an increase in productivity within a nation when there is an increase in each of the following EXCEPT: a. Labor b. physical capital/worker. c. human capital/worker. d. natural resources/worker GDP deflator is: a. The production of goods and services valued at constant prices. b. A measure of the price level calculated as the ratio of nominal GDP to real GDP times 100. c. Indicator of a country’s economic well-being. d. The production of goods and services valued at current prices. Demand for an inferior good: a. shift to the right when income increase b. is positively related to income. c. is negatively related to income. d. shift to the left when income decrease. In the graph bellow, what is the producer surpluses without tax: a. (A+B) b. (D+E+F) c. (A+B+C) d. (C+E) Policies to boost productivity: a. Encourage saving and investment, to fall K/L and Encourage investment from abroad, to raise K/L b. Encourage saving and investment, to raise K/L and Encourage investment from abroad, to raise K/L c. Encourage saving and investment, to fall K/L and Encourage investment from abroad, to fall K/L d. None of the above In the graph bellow, what is the total surplus with tax : a. (A+B+C) b. (D+E+F) c. (A+B+D+F) d. (A+B+C+D+E+F) A quantitative limit on imports of a good is called ____________. a. Deadweight loss. b. Tax c. A tariff. ECON 201 - MIDTERM BLUE 72 pg. 6  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 d. An import quota. Demand for an inferior good is ____________________ related to income. a. Positively related to income b. Negatively related to income c. Positively related to Price d. Negatively related to Price GDP is equal to: a. C + I + G + NX. b. Y + I c. Y - G d. C + I + G - NX. In the graph bellow, what is the consumer surpluses without tax : a. (A+B) b. (D+E+F) c. (A+B+C) d. (C+E) If the market price is _____ equilibrium price a surplus result, which causes the price to _______ a. Above, rise b. Above, fall c. Below, rise d. Below, fall A country will________ a good if the world price is higher than the domestic price a. Export b. Import c. Raise consumer surplus d. Reduce producer surplus According to the surveys of the Bureau of Labor Statistics, the biggest spending item of households is a. food and beverages. b. housing. c. medical care d. transportation. Means to sell domestically produced goods abroad. a. Imports b. Exports c. Net Exports d. All of the above ECON 201 - MIDTERM BLUE 72 pg. 7  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 import quota is to : a. Limit on imports of a good b. Increase on imports of a good c. Increase on Export of a good d. Limit on Export of a good In which instance can we observe a rise in the equilibrium price accompanied by a decline in the equilibrium quantity? a. When demand and supply increase, but the rise in supply exceeds the rise in demand. b. If supply declines while demand increases, and the decline in supply exceeds the increase in demand. c. If both demand and supply increase. d. If both demand and supply decline, but the decline in demand exceeds the decline in supply Macroeconomics is: a. The study of the economy as a whole. b. The study of how individual households and firms make decisions, interact with one another in markets c. The study of decisions made by people and businesses regarding the allocation of resources, and prices at which they trade goods and services. d. None of the above Inflation is almost always caused by: a. The government when raising taxes. b. Excessive growth in the quantity of money, which causes the value of money to fall. c. Extreme consumption from the households. d. Lack of growth in the economy which weaken the purchasing power. Rise the price for _______ demand goods will __________ Total Revenue and vice versa for _________ demand goods. a. highly inelastic, decrease, highly elastic b. highly inelastic, doesn't change, highly elastic c. highly elastic, increase, highly inelastic d. highly elastic, decrease, highly inelastic 1Y = A F(2L, 2K, 2H, 2N); this production function is considered: a. Decreasing return to scale. b. Increasing return to scale. c. Diminishing return to scale. d. Constant return to scale. Which one is included in National Income? a. Rent, Profit, Interest b. Rent, Wage, Salary, Interest, Profit c. Rent, Wage, Interest ECON 201 - MIDTERM BLUE 72 pg. 8  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 d. Rent, Wage, Salary Net exports equal to a. imports minus exports. b. exports minus imports. c. GDP minus imports. d. exports plus imports. A movement along the supply curve is caused by: a. A change in technology. b. A change in the number of sellers. c. A change in input prices. d. A change in price of the good. Poor countries have low level of ___________ relative to labor. Thus, the World Bank assist those countries to increase that ratio and hence ___________. a. Natural resources, productivity. b. Capital, GDP. c. Natural resources, GDP. d. Capital, productivity. Measures a country’s total income and expenditure. a. Inflation rate b. Gross Domestic Product c. Nominal Gross Domestic Product d. Investment Absolute advantage means being able to a. produce a good with fewer inputs. b. produce a good at a lower opportunity cost. c. produce a good at a Lower explicit cost. d. produce a good with higher inputs. Which goods or services should government tax to raise the revenue it needs a. Goods with No DWL b. Goods with the largest DWL. c. Goods with the smallest DWL. d. Goods with More price elastic demand Gross Domestic Product (GDP) Is: a. The market value of all final goods & services produced within a country in a given period of time b. The market value of all final goods & services produced outside and inside the country in a given period of time c. The market value of all final goods produced within a countryin a given period of time. d. The market value of all final goods & services produced outside the country in a given period of time ECON 201 - MIDTERM BLUE 72 pg. 9  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 Elasticity definition in general a. A numerical measure of the responsiveness of quantity demand to one of its determinants b. The number halfway between the start and end values, the average of those values. c. A numerical measure of the no responsiveness of quantity demand to one of its determinant. d. measures how much quantity demand responds to a change in price. In the graph bellow, what is the DeadWeight Loss with tax : a. (A+B) b. (D+E+F) c. (D+F) d. (C+E) Which of the goods will be included in GDP? a. A good has no market value b. A good produced aboard c. A good produced within Country’s borders d. A good produced last year 4Y = A F(2L, 2K, 2H, 2N); this production function is considered: a. Constant return to scale. b. Decreasing return to scale. c. Increasing return to scale. d. Diminishing return to scale. Two goods are _______ if an increase in the price of one causes a fall in demand for the other. a. Complements b. Normal good c. Substitutes d. Expectations Which goods or services should the government tax to raise the revenue it needs? a. When the price elasticity of supply is more elastic. b. When the price elasticity of demand is inelastic and DWL is small. c. Normal goods. d. When the DWL is large. Determinants of productivity: a. physical capital per worker , natural resources per worker and technological knowledge b. physical capital per worker , human capital per worker, natural resources per worker. c. physical capital per worker , human capital per worker, and technological knowledge d. physical capital per worker , human capital per worker, natural resources per worker and technological knowledge ECON 201 - MIDTERM BLUE 72 pg. 10  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 Making decisions requires comparing the costs and benefits of alternative choices a. Efficiency b. Rational people c. Opportunity Cost d. Equality If labor supply is inelastic, then this deadweight loss is: a. Same b. Small c. Large d. zero If GDP increase in a country, then the Life Expectancy will: a. Increase b. Increase & decrease c. Decrease d. Not change Our standard of living is most closely related to: a. how hard we work. b. our supply of capital, because everything of value is produced by machinery c. our productivity, because our income is equal to what we produce. d. our supply of natural resources, because they limit production. When society gets the most from its scarce resources means a. Efficiency b. Scarcity c. Opportunity Cost d. Equality Because of the catch-up effect, poor countries have _________ than rich countries due to _____________. a. higher productivity growth, decreasing return. b. lower productivity growth, diminishing return. c. lower productivity growth, decreasing return. d. higher productivity growth, diminishing return. Market equilibrium refers to a situation in which market price: a. is just above the intersection of the market supply and demand curves. b. is low enough for consumers to buy all that they want. c. is at a level where there is neither a shortage nor a surplus. d. is high enough to allow firms to earn a fair profit. An increase in the size of a tax causes the DWL to _____________ even more. a. Fall ECON 201 - MIDTERM BLUE 72 pg. 11  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 b. Rise c. Fall then rise. d. None of the above Net Exports (NX): a. exports - imports - investment. b. exports - imports - government Purchases - investment c. exports - imports. d. exports - imports - government Purchases GDP Does not value: a. Total expenditure on the economy’s output of goods & services. b. Total income of everyone in the economy. c. Revenue. d. Non-market activity, such as the child care a parent provides his or her child at home. The property whereby changing all inputs by the same percentage causes output to change by that percentage called a. The catch-up effect. b. Diminishing returns. c. Constant returns to scale. d. Productivity. Two goods are ______ if an increase in the price of one causes an increase in demand for the other. a. Complements b. Normal good c. Substitutes d. Expectations If a country does not have a comparative advantage, it _________ goods because the ________. a. imports, PD > PW b. imports, PD < PW c. exports, PD = PW d. exports, PD > PW Problems with the CPI: a. Substitution Bias & Unmeasured Quality Change b. Introduction of New Goods c. All of the above d. None of the above An increase in quantity supplied, shifted the supplied curve to the ECON 201 - MIDTERM BLUE 72 pg. 12  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 a. Left b. Mid c. Right d. Same point What of the following does NOT enter GDP? a. national defense b. public education c. public service d. life expectancy A tariff a. Increases the volume of trade b. Reduces the volume of trade c. Reduces the prices of trade d. Has no effect on volume trade The most important determinant of living standards : a. Income b. Inflation c. Supply-Demand d. Productivity A reasonable measure of the standard of living in a country is: a. real GDP per capita. b. Nominal GDP per capita. c. real GDP d. Nominal GDP If the nominal interest rate is 10 percent and the real interest rate is 4 percent, then the inflation rate is: a. -6 percent. b. 10 percent. c. 6 percent. d. 14 percent. The GDP deflator is a measure of the overall level of: a. goods b. Quantity c. Prices d. Liber Means to purchase goods produced in other countries. a. Imports b. Exports ECON 201 - MIDTERM BLUE 72 pg. 13  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 c. Net Exports d. All of the above If the United States raises Ford cars price in Saudi Arabia, this would affect the CPI and GDP deflator by: a. Only rises the GDP deflator without CPI. b. Almost no change on CPI and GDP c. Only rises the CPI without GDP deflator. d. Booth CPI an GDP deflator rises. The real interest rate is: a. computed by adding the inflation rate from the nominal interest rate b. computed by multiplying the inflation rate from the nominal interest rate c. corrected for inflation d. not corrected for inflation Real GDP is a measure using ________ prices, and it is _________ for inflation. a. Current, corrected b. Base year, not corrected c. Base year, corrected d. Current, not corrected ECON 201 - MIDTERM BLUE 72 pg. 14  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 Essay Question Compute nominal GDP, real GDP & GDP deflator in each year using 2011 as a base year. Juice 2019 P Q P Q 2011 10 10 5 15 2012 12 10 6 15 Compute the Nominal GDP in 2018 and GDP deflator in 2019 2017 (base year ) 2018 2019 P Q P Q P Q Good A 20 800 21 900 26 950 Good B 100 192 102 200 SR100 205 Suppose you are analyzing a Tariff on Cotton Shirts. World price per shirt is 20 SAR. The government has decided to charge a tariff of 10 SAR per shirt, therefore, buyers demand 80 and sellers supply 25. What is the Tariff revenue that the government receives? Compute the CPI on each year and the inflation rate on 2011 price of Coffee price of book 2010 (BASE YEAR) 2 $50 2011 4 $70 The domestic price is SR 3000 for Laptop and Quantity is 400 without trade (QS=QD) In the world price laptop worth SR 1500 and the Quantity demanded increases to 600 while the quantity supply decreases to 200 Under the free trade How many laptops will the country export or import? Calculate the Consumer Surplus, Producer Surplus and Total Surplus. A. Compute nominal GDP in 2018. B. Compute real GDP in 2019. C. Compute the GDP deflator in 2020. 2018 2019 2020 ECON 201 - MIDTERM BLUE 72 pg. 15  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 P Q P Q P Q Good A 900 1100 1000 1300 1100 1500 Good B 700 500 800 700 900 850 Which country has an absolute advantage in the production of dates? Which country has an absolute advantage in the production of sugar? Which country has a comparative advantage in the production of dates? Which country has a comparative advantage in the production of sugar? Show your work. Saudi Arabia and UAE each have 5000 hours of labor per month. In UAE: producing one tone dates requires 3 hours producing one tone sugar requires 5 hours In Saudi Arabia: producing one tone dates requires 2 hour producing one tone sugar requires 6 hours YOU HAVE TO CALCULATE. What is 1 SAR amount in 2007 worth in 2020? YEAR CPI 2007 207.3 2008 215.3 2009 214.5 2010 218.1 2011 225.7 2015 236.5 2016 241.4 2017 244.1 2018 251.2 2019 257 2020 258 Suppose Saudi Arabia and Ethiopia each have 10,000 hours of labor per month. In Saudi Arabia, -producing one kilogram of coffee requires 2 hours. -producing one bottle of water requires 4 hours. In Ethiopia, ECON 201 - MIDTERM BLUE 72 pg. 16  ECON201 – MIDTERM – SUMMER TERM 21 – REVIEWED BY BLUE 72 -producing one kilogram of coffee requires 1 hour. -producing one bottle of water requires 5 hours. find the Price elasticity of demand. Does this product consider elastic, inelastic or unit elastic? Would you expect higher or lower total revenue for this product when price increase? If the equilibrium Price =50 SAR, and the equilibrium Quantity =1000. Now, suppose Price increases to 70 SAR, and QD dropped to 500 Elasticity If the equilibrium Price =50 SAR, and the equilibrium Quantity =1000. Now, suppose Price increases to 70 SAR and QD dropped to 500 , find the Price elasticity of demand. Does this product consider elastic, inelastic or unit elastic? Would you expect higher or lower total revenue for this product when price increase? ECON 201 - MIDTERM BLUE 72 pg. 17  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 A consumer's willingness to pay directly measures A. The extent to which advertising and other external forces have influenced the consumer's preference B. Consumer surplus. C. How much a buyer values a good. D. The cost of a good to the buyer. Which of the Ten Principles of Economics does welfare economics explain more fully? A. The cost of something is what you give up to get it. B. Markets are usually a good way to organize economic activity. C. Trade can make everyone better off. D. A country's standard of living depends on its ability to produce goods and services. A price ceiling is binding when it is set A. Above the equilibrium price, causing a surplus. B. Above the equilibrium price, causing a shortage. C. Below the equilibrium price, causing a shortage. D. Below the equilibrium price, causing a surplus. The two loops in the circular-flow diagram represent A. The flow of inputs into production processes and the flow of outputs from production processes. B. The flow of goods and the Now of services. C. The flows of inputs and outputs and the flow of dollars. D. The flow of dollars and the flow of financial assets An economy's production of two goods is efficient if A. The opportunity cost of producing more of one good is zero. B. It is impossible to produce more of one good without producing less of the other. C. All members of society consume equal portions of the goods. D. The goods are produced using only some of society's available resources. pg. 1  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 Refer to Figure 2-11: Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B? A. A general technological advance. B. An increase in the availability of capital-producing resources. C. A technological advance in the consumer goods industries. D. A decrease in unemployment The principle of Comparative advantage asserts that A. The world price of a good will prevail in all countries, regardless of whether those countries allow international trade in that good. B. Countries can become better off by specializing in what they do best. C. Not all countries can benefit from trade with other countries. D. Countries can become better off by exporting goods, but they cannot become better off by importing goods. Which of the following can lead to market failure? A. Market power but not externalities. B. Externalities but not market power. C. Externalities and market power. D. Neither externalities nor market power If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is A. 2.5 percent. B. 13.5 percent. C. -2.5 percent pg. 2  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 D. 0.45 percent A nation's standard of living is best measured by its A. Nominal GDP per person. B. Real GDP. C. Real GDP per person. D. Nominal GDP. It costs a company $50,000 to produce 5000 beach towels. The company's cost will be $50,009 if it produces an additional beach ton company produces 5,000 beach towels, then A. Its average cost is less than its marginal cost. B. Its average cost is greater than its marginal cost C. Its average cost and its marginal cost are equal. D. There is insufficient information to compute average and marginal costs When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is production is not affected by changes in the prices of those goods and services. In other words, economists want to study A. A The GDP deflator. B. Real GDP C. GNP. D. Nominal GDP In a competitive market, the quantity of a product produced and the price of the product are determined by A. A single buyer. B. One buyer and one seller working together. C. A single seller. D. All buyers and all sellers. Economists make assumptions in order to A. Minimize the number of experiments that yield no useful data B. Minimize the likelihood that some aspect of the problem at hand is being overlook pg. 3  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 C. Focus their thinking on the essence of the problem at hand D. Minimize the methodologies employed by other scientists. In a simple circular-flow diagram, total income and total expenditure are A. Seldom equal because of the ongoing changes in an economy s unemployment rate B. Equal only when the government purchases no goods or services. C. Never equal because total income always exceeds total expending D. Always equal because every transaction has a buyer and a seller According to the circular-flow diagram GDP A. Cannot be computed as either the revenue firms receive or the payments they make to factors of production B. Can be computed as either the revenue firms receive from the sales of goods and services or the payments they make to lector of products C. Can be computed as the revenue firms receive from the sales of goods and services but not as the payments bey made to factor of produces D. Can be computed as payments firms make to factors of production but not as revenues they receive from the sales of goods and services When two countries trade with one another, it is most likely because A. The two countries wish to take advantage of the principle of comparative advantage B. The opportunity costs of producing various goods are identical for the two countries. C. Some people involved in the trade do not understand that one of the two countries will become worse off because of the tale D. the wealthy people in each of the two countries are able to benefit, through trade, by taking advantage of other people who are poor For a self-sufficient producer, the production possibilities fronter A. Is always a straight line. B. Is less than the consumption possibilities frontier. C. Is the same as the consumption possibilities frontier. D. Is greater than the consumption possibilities frontier pg. 4  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 Scenario The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 1913. Refer to Scenario: The price of a 1975 golf ball in 2005 dollars is A. $0.05. B. $0.73. C. $0.53. D. $2.00 Miller’s Dairy produces 960 gallons of milk per day. Each milker at the dairy works 8 hours per day and produces the same number of gallons of milk per hour. If the Dairy’s productivity is 12 gallons of milk per hour of labor, then how many milkers does the shop employ? A. 120. B. 80. C. 10. D. 8. Which famous economist developed the principle of comparative advantage as we know it today? A. Milton Friedman B. David Ricardo C. John Maynard Keynes D. Adam Smith A demand curve reflects each of the following except the A. Willingness to pay of all buyers in the market. B. Ability of buyers to obtain the quantity they desire. C. Highest price buyers are willing to pay for each quantity. D. Value each buyer in the market places on the good. Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per Tube. As a result of the price floor, the A. A.Demand curve for toothpaste shifts to the left. pg. 5  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 B. Quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases. C. Quantity supplied of toothpaste stays the same. D. Supply curve for toothpaste shifts to the right. An increase in the size of a tax is most likely to increase tax revenue in a market with A. Elastic demand and elastic supply. B. Elastic demand and inelastic supply. C. Inelastic demand and inelastic supply. D. Inelastic demand and elastic supply. The inflation rate is calculated A. A.By determining the change in the price index from the preceding period. B. By computing a simple average of the price increases for all goods and services, C. By determining the percentage increase in the price index from the preceding period D. D.By adding up the price increases of all goods and services. An organization that tries to encourage the flow of investment to poor countries is the A. Alliance of Developing Countries. B. Organization of Less Developed Countries. C. International Development Alliance. D. World Bank. Scenario. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost A. $7.32, so golf balls were cheaper in 2005. B. $0.55, so golf balls were cheaper in 1975. C. $0.55, so golf balls were cheaper in 2005. D. $7.32, so golf balls were cheaper in 1975. Price ceilings and price floors that are binding A. Can have the effect of restoring a market to equilibrium. B. Are imposed because they can make the poor in the economy better off without causing adverse effects. pg. 6  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 C. Are desirable because they make markets more efficient and more fair. D. Cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price. The principle of Comparative advantage asserts that A. The world price of a good will prevail in all countries, regardless of whether those countries allow international trade in that good B. Countries can become better off by exporting goods, but they cannot become better off by importing goods. C. Countries can become better off by specializing in what they do best. D. Not all countries can benefit from trade with other countries On a graph, the area below a demand curve and above the price measures A. Consumer surplus, B. Deadweight loss. C. Producer surplus D. Willingness to pay Good X and good Y are substitutes. If the price of good Y increases, then the A. Demand for good X will decrease. B. Quantity demanded of good X will increase. C. Quantity demanded of good X will decrease. D. Demand for good X will increase. If in some year real GDP was $5 trillion and the GDP deflator was 200, what was nominal GDP? A. $10 trillion. B. $40 trillion. C. $2.5 trillion. D. $100 trillion. A country has a comparative advantage in a product if the world price is A. Lower than that country's domestic price without trade. B. Equal to that country's domestic price without trade. pg. 7  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 C. Not subject to manipulation by organizations that gover international trade D. Higher than that country's domestic price without trade. Refer to Figure: Before the tariff is imposed, this country A. Exports 200 carnations. B. Imports 400 carnations. C. Imports 200 carnations. D. Exports 400 carnations. Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. Refer to Table 3-5. Assume that England and Spain each has 40 labor hours available. If each country divides its time equally between the production of cheese and bread, then total production is A. 20 units of cheese and 5 units of bread. B. 25 units of cheese and 7.5 units of bread. C. 40 units of cheese and 10 units of bread. D. 50 units of cheese and 15 units of bread. pg. 8  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 Which of the following is a correct way to measure productivity? A. Determine how much output is produced in a given time. B. Divide the quantity of output by the number of hours worked. C. Divide the number of hours worked by the quantity of output. D. Determine how much time it takes to produce a unit of output. To fully understand how taxes, affect economic well-being, we must compare the A. Consumer surplus to the producer surplus. B. Reduced welfare of buyers and sellers to the revenue raised by the government. C. Consumer surplus to the deadweight loss. D. Price paid by buyers to the price received by sellers. By definition, exports are A. Limits placed on the quantity of goods brought into a country. B. Goods in which a country has an absolute advantage. C. Goods produced domestically and sold abroad. D. People who work in foreign countries. Refer to Figure: Which area represents consumer surplus at a price of P22. Quantity A. ABD B. ACG C. BCDF D. DFG pg. 9  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the A. Demand curve for toothpaste shifts to the left. B. Quantity supplied of toothpaste stays the same. C. quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases. D. Supply curve for toothpaste shifts to the right. Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at A. The equilibrium price but not above or below the equilibrium price B. Prices at and below the equilibrium price. C. Prices above and below the equilibrium price, but not at the equilibrium price. D. Prices at and above the equilibrium price. Consumption consists of spending by households on goods and services, with the exception of A. purchases of intangible services. B. purchases of durable goods. C. purchases of new houses. D. spending on education. Refer to Figure, The price ceiling causes quantity A. supplied to exceed quantity demanded by 45 units. B. supplied to exceed quantity demanded by 85 units. C. demanded to exceed quantity supplied by 45 units. pg. 10  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 D. demanded to exceed quantity supplied by 85 units. A production possibilities frontier is a straight line when A. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. B. an economy is interdependent and engaged in trade instead of self-sufficient. C. the rate of tradeoff between the two goods being produced is constant. D. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced. If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is A. 96.1 so prices are higher than in the base year. B. 104.1 so prices are higher than in the base year. C. 96.1 so prices are lower than in the base year. D. 104.1 so prices are lower than in the base year In the circular-flow diagram, A. goods and services using factors of production. B. output using inputs. C. factors of production using goods and services. D. Both (a) and (b) are correct. Refer to Figure, The equilibrium allocation of resources is A. Inefficient because consumer surplus is larger than producer surplus at the equilibrium. pg. 11  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 B. Inefficient because total surplus is maximized when 10 units of output are produced and sold. C. Efficient because total surplus is maximized at the equilibrium. D. Efficient because consumer surplus is maximized at the equilibrium. Rational people make decisions at the margin by A. following marginal traditions. B. behaving in a random fashion. C. thinking in black-and-white terms. D. comparing marginal costs and marginal benefits Suppose Country A has a high average wage level and a high level of output per person, while Country B has a low average wage level and a low level of output per person. Which country can benefit from trade? A. Only Country A can benefit. B. Only Country B can benefit. C. Both Country A and Country B can benefit. D. Neither Country A nor Country B can benefit. Scenario: The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3 Refer to Scenario: The price of a 1975 tennis ball in 2005 dollars is A. A.$1.00. B. $0.37. C. $0.03. D. $0.27. If the nominal interest rate is 7.5 percent and the rate of inflation is -2.5 percent, then the real interest rate is A. -5 percent. B. 5 percent. C. 10 percent. D. 11 percent. pg. 12  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 For an imaginary economy, the value of the consumer price index was 140 in 2006 and 149.10 in 2007. The economy’s inflation rate for 2007 was A. 6.1 percent. B. 9.1 percent. C. 6.5 percent D. 49.1 percent. Refer to Table: If 2006 is the base year, then the CPI for 2006 was A. 120. B. 83.3. C. 240. D. 100. Trade between countries A. Can best be understood by examining the countries absolute advantages B. Allows each country to consume at a point outside its production possibilities frontier C. Must benefit both countries equally; otherwise, trade is not mutually beneficial D. Limits a country's ability to produce goods and services on its oun The invisible hand refers to A. how central planners made economic decisions. B. how the decisions of households and firms lead to desirable market outcomes. C. the control that large firms have over the economy. D. government regulations without which the economy would be less efficient pg. 13  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 Suppose an economy produces only iPhones and bananas. In 2010, 1000 iPhones are sold at $300 each and 5000 pounds of banana pound. In 2009, the base year, iPhones sold at $400 each and bananas sold at $2 per pound. For 2010, A. Nominal GDP is $410 000, real GDP is $315,000, and the GDP deflator is 76.83. B. Nominal GDP is $315,000, real GDP is $410,000, and the GDP deflator is 76.83. C. Nominal GDP is $410.000, real GDP is $315.000. and the GDP deflator is 130.16. D. Nominal GDP is $315.000, real GDP is $410,000, and the GDP deflator is 130.16. Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year la 2002, the banana was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $57.25. The value of the CPI in 2006 was A. 91.6. B. 104.6. C. 114.5. D. 109.2. If the consumer price index was 100 in the base year and 107 in the following year, then the inflation rate was A. 10.7 percent. B. 1.07 percent. C. 107 percent. D. 7 percent. If real GDP is 5,100 and nominal GDP is 4900, then the GDP deflator is A. 96.1 so prices are lower than in the base year. B. 96.1 so prices are higher than in the base year. C. 104.1 so prices are lower than in the base year. D. 104.1 so prices are higher than in the base year. If in some year nominal GDP was $20 billion and the GDP deflator was 50, what was real GDP ? A. $2.5 billion B. $10 billion C. $40 billion D. $100 billion pg. 14  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 The inflation rate is defined as the A. price level in an economy. B. change in the price level from one period to the next. C. percentage change in the price level from the previous period. D. price level minus the price level from the previous period. If nominal GDP is $12 trillion and real GDP is S10 trillion, then the GDP deflator is A. 83.33, and this indicates that the price level has decreased by 16.67 percent since the base year. B. 83.33, and this indicates that the price level has increased by 83.33 percent since the base year. C. 120, and this indicates that the price level has increased by 20 percent since the base year. D. 120, and this indicates that the price level has increased by 120 percent since the base year. Which of the following is correct? A. Nominal GDP equals real GDP in all years but the base year. B. Nominal GDP equals real GDP in the base year. C. Nominal GDP is always greater than real GDP. D. Nominal GDP is always less than real GDP. When a tax is imposed on the buyers of a good, the demand curve shifts A. Downward by less than the amount of the tax. B. Downward by the amount of the tax. C. Upward by more than the amount of the tax D. Upward by the amount of the tax Absolute advantage is found by comparing different producers' A. Payments to land, labor, and capital. B. Opportunity costs. C. Locational and logistical circumstances. D. Input requirements per unit of output. pg. 15  ECON201 – MIDTERM EXAM 2021-2020 – BLUE72 The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that A. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. B. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits. C. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. D. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs. The phenomenon of scarcity stems from the fact that A. Most economies' production methods are not very good. B. Governments restrict production of too many goods and services. C. Resources are limited. D. In most economies, wealthy people consume disproportionate quantities of goods and services. Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 chair is A. 1/5 table for Mike and 1/3 table for Sandy. B. 1/5 table for Mike and 3 tables for Sandy. C. 5 tables for Mike and 1/3 table for Sandy. D. 5 tables for Mike and 3 tables for Sandy. Oil is considered to be a non-renewable energy source. Oil A. Is a scarce resource. B. Is an unlimited resource. C. Has no opportunity cost. D. Is not a productive resource. pg. 16  SEUSEUSEU | ELITE| ELITE - – ECON201 | ELITE - ‫اﻟﻤﻘﺮر‬ MID FY 2023-2024 – 1st TERM ECON201 SEU | ELITE  SEU | ELITE – ECON201 Q1. Savers can directly provide funds to borrowers through…………. A. Financial markets ✅ B. Financial intermediaries. C. Financial system. D. Mutual funds. Q2. Calculate the Nominal GDP and Real GDP for the year 2022 if the base year is also 2022 and the country is producing only one product. Price per unit and quantity per year is given as follows. For 2021, P=90, Q = 200, For 2022 P=100, Q=200, For 2023 P=110, Q=190, A. Nominal GDP = 20000 and Real GDP = 19000 B. Nominal GDP = 20000 and Real GDP = 18000 C. Nominal GDP = 20000 and Real GDP = 20000✅ D. Nominal GDP = 18000 and Real GDP = 18000 Q3. “People Face Tradeoffs” Which of the following statements does not present this principle? A. Allows people to specialize according to comparative advantage ✅ B. Having more money to buy stuff requires working longer hours, which leaves less time for leisure. C. Protecting the environment requires resources that could otherwise be used to produce consumer goods. D. Going to a party the night before your midterm leaves less time for studying. Q4. A point that is over and above the production possibilities curve presents A. A situation that is not possible in an economy✅ B. Inefficient but fully employed resources. C. Efficient but under-employed resources D. Efficient and fully employed resources. Q5. Which of the following sets of actors presents the actors of the simple circular-flow diagram of an economy? A. households and government B. households and firms ✅ C. firms and government D. markets and cash flow Q6. Choose the option that represents the value of the GDP deflator for the base year. 1 -1 100 ✅ 0  SEU | ELITE – ECON201 Q7 Calculate the Inflation rate for the year 2022 if the consumer price index (CPI) for 2021 is 120 and for 2022 is 150. A. 25 percent✅ B. 15 percent C. 50 percent D. 30 percent Q8. Which of the following statements is true If the government of a country sets a non-binding price floor for a particular product? It will cause a shortage in the market. it will cause a surplus in the market. the market will be less efficient than it would be without the price floor. It will neither affect the market equilibrium price nor the equilibrium quantity. ✅ Q9. Which of the following is/are non-price determinant/s of demand? A. Income of the consumer B. Price of the product C. Price of the substitute and complementary goods D. Options a & c✅ Q10. Compute the Net exports of a country for the current year if, in the first six months, the country has a current trade deficit of $10 billion and then in the next six months its exports rose by $30 billion and its imports rose by $10 billion. A. $10 billion✅ B. $ 5 billion. C. $0 D. -$20 billion. Q11. In a market where Supply is more elastic than demand? A. buyers bear most of the burden of the tax B. Sellers will request the buyer to pay the tax C. Sellers bear most of the burden of the tax D. Both seller and buyer will bear an equal amount of tax Q12. Which of the following is not true about GDP? A. GDP considers the net exports of the country as one of its four components. B. GDP does not consider the unsold product of the previous year if sold and consumed in the year of GDP. C. GDP does not consider any money invested to buy shares. D. GDP considers non-market activity, such as childcare care, a parent provides his or her child at home✅  SEU | ELITE – ECON201 Q13. Tax…….. A. increases the dead weight loss and decreases the Total surplus. ✅ B. increases both the dead weight loss and Total surplus. C. decreases both the dead weight loss and Total surplus. D. decreases the dead weight loss and increases the total surplus Q14. When a country increases its exports, generally it...…. A. Increases Producer surplus and total surplus. ✅ B. Decrease consumer surplus and total surplus. C. increases Consumer surplus but decreases producer surplus D. increases Consumer surplus but Total surplus. Q15. Which of the following statements is correct about a tariff and a quota? A. tariff and a quota both are beneficial for the importers of the country. B. tariff and quotas help consumers get goods at lower prices. C. tariff and a quota both are generally imposed to restrict import in a country. ✅ D. tariff and a quota both are generally imposed to increase exports of a country. Q16. What do you mean by Consumer Surplus, Producer Surplus, Total Surplus, and Deadweight Loss? Answer ✅ What is deadweight loss? Is the fall in total surplus (consumer surplus, producer surplus, and tax revenue) is called the dead weight loss (DWL) of the tax Consumer surplus is the amount a buyer is willing to pay minus the amount the buyer actually pays: Producer surplus (PS): the amount a seller is paid for a good minus the seller’s cost Total surplus: equals to total gains from trade in a market.  SEU | ELITE – ECON201 Q17. If the year 2020 is considered as the base year, calculate the Consumer Price Index (CPI) for the year 2022 and the Inflation rate for the year 2021-22 for a country that has just two products, burger, and tea in its basket of CPI calculation. That basket contains 5 burgers and 10 Teas. price per unit for each year is as follows: For the year 2020, the Price of each burger is 8 SAR, Price of each Tea is SAR1.5 For the year 2021, the Price of each burger is 9 SAR, Price of each Tea is SAR 2 For the year 2022 the Price of each burger is 10 SAR, Price of each Tea is SAR 2.5 Answer ✅ The CPI for the year 2022: CPI = (Total cost of the basket in 2022 / Total cost of the basket in 2020) × 100 CPI = (75 SAR / 55 SAR) × 100 CPI = 136.36 The inflation rate for the year 2021-22: Inflation rate = ((CPI in 2022 - CPI in 2021) / CPI in 2021) × 100 Inflation rate = ((136.36 - 118.18) / 118.18) × 100 Inflation rate = 15.38%  Midterm Exam 2022-2023-Ist Semester ECON201-MACROECONOMICS Section: I Multiple Choice questions 15x1= 15 Marks 1. Efficiency means that (CH-1) a. society is conserving resources to save them for the future. b. society's goods and services are distributed equally among society's members. c. society's goods and services are distributed fairly, though not necessarily equally, among society's members. d. society is getting the maximum benefits from its scarce resources. 2. Suppose if you are calculating the cost of college, which of the following should you not include? (CH-1) a. The cost of books required for college classes b. The income you would have earned had you not gone to college c. The cost of rent for your off-campus apartment. d. The cost of tuition 3. When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good (CH-2) a. increases as more of the good is produced. b. decreases as more of the good is produced. c. does not change as more of the good is produced. d. may increase, decrease, or not change as more of the good is produced. 4. Zaid and Rayyan both make tables and chairs. In one month, Zaid can make 4 tables or 20 chairs, where Rayyan can make 6 tables or 18 chairs. Given this, what is the opportunity cost of 1 chair (CH-3) a. 1/5 table for Zaid and 1/3 table for Rayyan. b. 1/5 table for Zaid and 3 tables for Rayyan. c. 5 tables for Zaid and 1/3 table for Rayyan. d. 5 tables for Zaid and 3 tables for Rayyan. 5. Absolute advantage is found by comparing different producers’ (CH-3) Reenoo707  a. opportunity costs. b. payments to land, labor, and capital. c. input requirements per unit of output. d. locational and logistical circumstances. 6. In a market economy, supply and demand are important because they (CH-4) a. play a critical role in the allocation of the economy’s scarce resources. b. determine how much of each good gets produced. c. can be used to predict the impact on the economy of various events and policies. d. All of the above are correct. 7. Which of the following events must cause equilibrium price to fall? (CH-4) a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase 8. A price ceiling will be binding only if it is set (CH-6) a. equal to the equilibrium price. b. above the equilibrium price. c. below the equilibrium price. d. either above or below the equilibrium price. 9. When a tax is placed on the buyers of a product, the (CH-6) a. size of the market decreases. b. effective price received by sellers decreases, and the price paid by buyers increases. c. demand for the product decreases. d. All of the above are correct. 10. Sarah buys a new MP3 player for $165. She receives consumer surplus of $45 on her purchase if her willingness to pay is (CH-7) a. $25. b. $210. c. $135. d. $160. 11. The decrease in total surplus that results from a market distortion, such as a tax, is called a (CH-8) a. wedge loss. b. revenue loss. c. deadweight loss. d. consumer surplus loss. Reenoo707  12. When a good is taxed, the burden of the tax (CH-8) a. falls more heavily on the side of the market that is more elastic. b. falls more heavily on the side of the market that is more inelastic. c. falls more heavily on the side of the market that is closer to unit elastic. d. is distributed independently of relative elasticities of supply and demand. 13. A country has a comparative advantage in a product if the world price is (CH-9) a. lower than that country’s domestic price without trade. b. higher than that country’s domestic price without trade. c. equal to that country’s domestic price without trade. d. not subject to manipulation by organizations that govern international trade. 14. One bag of flour is sold for $2.00 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold for $2 to a grocery store who sells it to a consumer for $3.00. Taking these four transactions into account, what is the effect on GDP? (CH-10) a. GDP increases by $3.00. b. GDP increases by $5.00. c. GDP increases by $6.00. d. GDP increases by $7.00. 15. If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is (CH-10) a. 104.1 so prices are higher than in the base year. b. 104.1 so prices are lower than in the base year. c. 96.1 so prices are higher than in the base year. d. 96.1 so prices are lower than in the base year. Section-II 2x2.5=5 Mark 1. Computing GDP 2017 2018 2019 P Q P Q P Q Good 40 800 42 900 45 1000 A Good 80 250 85 275 90 300 B Use the above data to solve these problems: A. Compute nominal GDP in 2017. B. Compute real GDP in 2018. C. Compute the GDP deflator in 2019. Reenoo707  Answer: A. $40 x 800 + $80 x 250 = 52000 Nominal GDP in 2017 B. $40 x 900 + $80 x 275 = 58000 Real GDP in 2018 C. Nominal GDP $45 x 1000 + $90 x 300 = 72000 Real GDP $40 x 1000 + $80 x 300 =64000 GDP Deflator is 100 x (72000/64000) =112.5 2. What is the Consumer Price Index (CPI)? How is it calculated? What’s it used for? 1. Fix the “basket.” The Bureau of Labor Statistics (BLS) surveys consumers to determine what’s in the typical consumer’s “shopping basket.” 2. Find the prices. The BLS collects data on the prices of all the goods in the basket. 3. Compute the basket’s cost. Use the prices to compute the total cost of the basket. 4. Choose a base year and compute the index. The CPI in any year equals Consumer price index =Price of basket of goods and services in current year/ Price of basket in base year × 100. 5. Compute the inflation rate. The percentage change in the CPI from the preceding period. Inflation Rate= CPI this year – CPI last year/ CPI last year X 100 Reenoo707