PA - Assessing Global Economic Performance and International Trade

Question 1

Consumer Surplus

Answer 1

Measures the economic well-being of buyers and is useful for policymakers. Example: If a customer is willing to pay $100 for a product but pays $70, their surplus is $30.

Question 2

Producer Surplus

Answer 2

Used to measure the well-being of sellers. Example: A farmer sells corn for $5 per unit, even though they were willing to accept $3, gaining $2 surplus.

Question 3

Gross Domestic Product (GDP)

Answer 3

Measures the market value of all final goods and services produced within a country in a given time. Example: A car manufactured in the U.S. and sold counts toward U.S. GDP.

Question 4

Consumption Component of GDP

Answer 4

Includes spending by households on goods and services. Example: Paying for a haircut is counted in consumption.

Question 5

Effect of Tariff on Government Revenue

Answer 5

An import tariff increases domestic government revenue. Example: A tax on imported apples raises funds for the government.

Question 6

Tariffs and Government Revenue

Answer 6

Tariffs allow governments to raise revenue. Example: Import duties on steel generate income for a country’s treasury.