Introduction to Economics 2

Yanıt Açıklaması: Countries restrict their international trade by using restrictive trade instruments. Restrictive trade instruments are examined into two groups: Tariffs and non-tariff restrictions. A tariff is a tax or duty levied on the traded commodity as it crosses a national boundary. A non-tariff restriction is any action other than a tariff that restricts international trade.

Yanıt Açıklaması: Increasing cost is one of the factors that create cost-push inflation in the economy.

Yanıt Açıklaması: Barter is the direct exchange of goods or services for another without using any medium of exchange.

Yanıt Açıklaması: Bad weather conditions is a factor for decrease in aggregate supply.

Yanıt Açıklaması: Balance of Payments = Current Account + Capital and Financial Account + Official Reserves Account + Statistical Discrepancy Account

Yanıt Açıklaması: Internal Equilibrium refers to the full employment of economy with price stability.

Yanıt Açıklaması: At the autarky, production possibilities frontier (PPF) and the consumption possibilities frontier (CPF) of a country are identical. In other words, production and consumption points are the same and they are both on the same frontier.

Yanıt Açıklaması: Correct answer is B, other countries are ranked either high or medium.

Yanıt Açıklaması: The correct version of the statements above are as follows: A change in real income and/or prices means a change in nominal income. There is no possibility of barter in a modern economy, so economic units need money to perform their daily operations. The reason you hold money in your wallet to buy something is that acquisition periods of income are generally not matching with spending periods.

Yanıt Açıklaması: Supply shock, which is also known as the productivity shock, is defined as the shocks that affect the economy’s production function.

Yanıt Açıklaması: One of the functions of money is to be a store of value. Money, as a store of value, ensures to keep purchasing power on hand. For example, you hold an amount of purchasing power equal to the amount of money in your pocket right now. If you have 20 TL in your pocket, you can imagine your purchasing power by thinking about the goods and services you may purchase with this amount of money and understand this function of money easily. This function of money is closely related with the prices of goods and services in the country. For instance, if all prices double right now, the amount of goods and services you can purchase with the money in your pocket cut in half. In other words, your purchasing power with the money in your pocket halves. Contrary, if all prices of goods and services are lowered, then you can purchase more goods and services with the money in your pocket, meaning that your purchasing power increases.

Yanıt Açıklaması: Correct answer is B.

Yanıt Açıklaması: Even though the Solow growth model is the basic framework for the most following research on growth, it has a number of important weaknesses. Firstly, in the Solow model, the long-run per capita growth rate is determined entirely by the rate of technological progress but the technological growth is outside the model, which is exogenous. Secondly, the evidence shows that income per capita differentials across the countries are much greater than predicted by the model. Differences in capital per labor across countries are too small to account for the observed disparities in real incomes. Thirdly, the model assumes that the marginal product of capital should be much higher in poor countries than in rich countries. The observed tenfold differential in output per worker between rich and poor countries implies a hundredfold difference in the marginal product of capital if output gaps are entirely due to variations in capital intensities. Such differentials in the rate of return to capital are simply not observed between rich and poor countries. Finally, the capital accumulation alone cannot account for either growth of per capita income over the long-run or the enormous disparities in living standards among the nations. In order to overcome this problem, Mankiw et al. (1992) and Mankiw (1995) developed the augmented Solow model by adding the accumulation of human capital to the initial variables.

Yanıt Açıklaması: Equilibrium price level is the price level at which the aggregate demand is equal to aggregate supply.

Yanıt Açıklaması: The best way to understand the function of money as a medium of exchange is to consider an environment having no common instrument for exchanging. In such an environment, goods and services would be exchanged with other goods and services. So, in such environments there would be a barter economy and people would Exchange the goods they produced with the goods they want to consume.

Yanıt Açıklaması: Non-tariff restrictions imposed in the national economy: Health standards, sanitary and phyto-sanitary standards, environmental standards, labor standards, product standards, production subsidies, internal charges, etc. This category of non-tariff restrictions are the behind-the border restrictions.