Macroeconomics Test 2

Babe Ruth's 1931 salary was $80,000. Gov. stats show a consumer price index of 15.2 for 1931 and 195 for 2005. RUth's 1931 salary was equivalent to a 2005 salary of about?

$1,026,000

Over the past century in the US, average income as measured by real GDP per person has grown about?

2% per year, which implies a doubling about every 35 years

If the nominal interest rate is 8% and the rate of inflation is 5.5%, then the real interest rate is?

2.5%

The marginal tax rate on labor income for many workers in the US is almost?

50%

When a country is on the downward-sloping side of the Laffer curves, cutting tax rates will?

Increase tax revenues and decrease deadweight loss

Willingness to pay?

Measures the value that a buyer places on a good

If the tax on a good is doubled, the deadweight loss of the tax?

Quadruples

The Laffer curve?

Relates income tax rates to total income taxes collected

For a certain economy in 2014, GPD was $2,000; investment was $400; gov. purchases were $300; and net exports were $70. It follows that consumption was?

$1,230

Suppose Lauren, Leslie, and Lydiea all purchase bulletin boards for their rooms for $15 each. Lauren's willingness to pay was $35, Leslie's was $25, and Lydia's was $30. Total consumer surplus for these three would be?

$45

In a given year an econ. has consumption of $3,000, investment of $2,000, gov. purchases of $1,500, exports of $500, imports of $600, taxes of $1,200, transfer payments of $400, and depreciation of $300. This economy's GDP is?

$6,400

A transfer payment is?

A form of gov. spending that is not made in exchange for a currently produced good or service

Which of the follwoing is a tax on labor?

A. Medicare tax B. Social Security tax C. Federal income tax (All are correct you moron)

Taxes cause deadweight losses because?

A. Taxes reduce the sum of producer and consumer surpluses by more than the amount of tax rev. B. Taxes prevent buyers and sellers from realizing some of the gains from trade C. Taxes cause marginal buyers and marginal sellers to leave the market, causing the quantity sold to fall (Alright, if you haven't figured out that all 3 are correct by now, I can't help you anymore. Go to a professional or something, seriously. my gosh that guy's an idiot)

Which of the following taxes is, at least in large part, a tax on labor?

A. The Social Security tax B. The Medicare tax C. The federal income tax (All are correct)

Taxes cause deadweight losses because?

B. They prevent buyers and sellers from ralizing some of the gains from trade C. Marginal buyers and sellers laave the market causing the quantity sold to fall

it doesn't matter whether a tax is levied on the buyers or the sellers of a good because?

Buyers and sellers will share the burden of the tax

The CPI and the GDP deflator?

Generally move together

If one wants to know how the material well-being of the average person has changed over time in given country, one should look at the?

Growth rate of the real GDP per person

The component of GDP called consumption consists of?

Household spending on durable and nondurable goods as well as household spending on services

Welfare Economics is the study of?

How the allocation of resources affects economic well-being

After the terrorist attacks on Sept. 11, govern. within the US raised expenditures to increase security at airports. These purchases of goods and services are?

Included in GDP since gov. expenditures are included in GDP

When there is a tech. advance in the ice cream industry, consumer surplus in that market will?

Increase

A tech. advance in the production of computers will?

Increase consumer surplus in the market for computers and increase producer surplus in the market for computer software

As the size of a tax increases, the deadweight loss from the tax

Increases

Which of the following is correct for Efficiency?

It deals with the size of the econ pie and equity deals with how fairly the pie is sliced

What happens to consumer surplus if the price of a good increases?

It decreases

Economists generally agree that the most important tax in the US econ. is the?

Labor tax

The larger the deadweight loss of taxations, the?

Larger the cost of any government program.

Government purchases include spending on goods and services by?

Local, state, and federal gov.

Which of the Ten Principles of Econ does welfare econ explain more fully?

Markets are usually a good way to organize economic activity

If the size of a tax increases, tax revenue?

May increase, decrease, or remain the same

The consumer price index is used to?

Monitor changes in the cost of living

If the gov. quadrupled the tax on gas, the deadweight loss from the gas tax would?

More than quadruple

For the purpose of calculating GDP, investment is spending on?

New capital equipment, inventories, and structures, including new housing

Inefficiency exists in an econ. when a good is?

Not being produced by the lowest-cost producers

The higher a country's tax rates, the more likely that country will be?

On the negatively sloped part of the Laffer curve

A tax on a good?

Raises the price that buyers effectively pay and lowers the price that sellers effectively receive.

A nation's standard of living is measured by its?

Real GDP per person

A supply curve can be used to measure producer surplus because it reflects?

Sellers' costs

One result of a tax, irrespective of whether the tax is placed on the buyers or the sellers, is that the?

Tax reduces the welfare of both buyers and sellers

The Laffer curve illustrates that?

Tax rev. first rises, then falls a s a tax inc.

Which of the following ideas is the most plausible?

Tax rev. is more likely to increase when a low tax rate is inc. than when a high tax rate is inc.

Producer surplus is?

The amount a seller is paid minus the cost of production

The GDP is defined as?

The market value of all final goods and services produced within a country in a given period of time

Labor taxes may distort labor markets greatly if?

The number of hours many part-time workers want to work is very sensitive to the wage rate

The term inflation is used to describe a situation in which?

The overall level of prices in the econ. is increasing

Wich of the following statemetns is correct about the rlationship between the nominal interest rate and the real interest rate?

The real interest rate is the nominal interest rate minus the rate of inflation

Deadweight oss measures the?

aLoss in a market to buyers and sellers that isn't offset by an increase in gov. Rev.