ECO 110 Test 2

Overfishing certain parts of the ocean and certain species of fish has been a problem for centuries with countries actually going to war over fishing disputes. Ronald Coase would suggest that there would be no the problem if

someone owned (and could control) the ocean.

Compared to Italy and Japan in recent years, the debt as a percentage of GDP in the US is

substantially smaller.

The Clean Water Act has

succeeded in getting many bodies of water in the U.S. to acceptably clean levels.

In the market for a foreign currency, the curve that represents the "willingness of those who have foreign currency to trade them for the U.S. dollar" is the

supply curve.

Decriminalizing a drug is likely to lead to a price decrease if

the anticipated supply effect is greater than the anticipated demand effect.

An example of an externality that we see every day is

the emissions from a car's tailpipe.

Discretionary Fiscal Policy differs from Nondiscretionary Fiscal Policy in that

the former requires timely decisions, whereas the latter is built into the system.

When tackling local environmental problems, taxes and regulations can be useful. The reason that global problems (like global warming) are more difficult to control is that

there is no ability to enforce those taxes or regulations.

The evidence on most environmental pollutants (lead in the air and water, sulfur in the air, etc.) is that

they have decreased substantially in the last 20 years.

An example of an external cost of alcohol is

traffic fatalities attributable to drunk driving.

Economists refer to the problem that exists when public property is treated poorly because it is in no one's private interest to protect it as the

tragedy of the commons.

An increase in the expected inflation rate in one country will

weaken its currency.

Federal Spending in 2016 was

$4 trillion.

When looking at a balanced-budget amendment to the U.S. Constitution, economists

are of two minds with opponents concerned about its procyclical nature.

The massive deficit in the U.S. current account primarily reflects the

excess of U.S. imports over U.S. exports.

No government intervention in active markets for foreign currency is typical of a

floating exchange rate system.

From one country's perspective a strong currency is

good for some people and bad for others.

Mandatory spending implies spending that is

required by a previously passed set of laws.

The cost to taxpayers of smoking include

the increased cost of Medicaid patients who smoke.

The national debt is the

total amount owed by the federal government.

Use the aggregate supply-aggregate demand model to determine which of the following will lead to higher aggregate output.

A cut in interest rates

To offset an increased demand for its currency, a government fixing its exchange rate

must increase the supply of its currency.

An example of an external cost of tobacco is

unnecessary deaths induced by second-hand smoke.

An example of an externality associated with drugs is a drug

user ruining a spouse's life.

Discretionary fiscal policy as a tool for making things better is

considered by many to be effective but subject to several concerns over timing and motive.

Prohibition as a strategy for controlling externalities might actually

create new problems, such as turf wars among gangs or increased incarceration.

Logrolling occurs when

members of Congress trade votes to get their programs passed.

"Net transfers of private money" most often represent

money sent home by foreign workers in the U.S.

Compared to a recreational user of a drug, an addicted user's elasticity of demand is

much less elastic.

Global environmental problems are less easily solved than those confined to a single country because

there is no effective enforcement mechanism available for solving global problems.

Disagreements about the shape of the aggregate supply curve focus on the degree of _________ in the economy.

unemployment

Which of the following will increase macroeconomic equilibrium real gross domestic product?

a decrease in input prices

Continuous government intervention in markets for foreign currency is typical of a

fixed exchange rate system.

An increasing portion of the U.S. national debt is held by

government trust funds.

Total federal spending on health care, after adjusting for inflation, has been

growing.

After accounting for externalities with a social cost curve, the new equilibrium would be such that equilibrium price is

higher than before and equilibrium quantity is lower than before.

External costs are modeled by creating a new social cost curve that is

higher than the original supply curve.

In the market for euros, an increase in U.S. imports from Europe tends to

increase equilibrium price.

The portion of the national debt owed to citizens of other countries

is economically important and it has been rising in recent years.

An environmental economist would likely recommend which of the following policies?

A tax on gasoline equal to the environmental damage caused by a gallon of gasoline

If policy makers were to attempt to set a tax equal to the external costs of alcohol, one would have to evaluate

the value of innocent lives lost to drunk driving.

What two numbers "balance"?

The capital account and the current account.

Which of the following would economists label as an example of the "tragedy of the commons?"

The over-grazing of public land by ranchers

Which of the following will increase macroeconomic equilibrium prices?

an increase in input prices

Federal spending is typically ___ percent of GDP .

between 18 and 22

An economist worrying about the economic impact of environmental regulations would model that impact with a

decrease in aggregate supply.

Which of the following programs is off-budget?

Social Security

The largest single item in federal spending is

Social Security.

Which of the following would be described as the operational lag?

The time required to get a particular plan implemented with the money getting into peoples' hands.

An economist worrying about the economic impact of environmental regulations would model that impact with

a decrease in aggregate supply.

An example of discretionary fiscal policy would be

a tax cut adopted to stimulate consumption.

Congress and the president have control of the tax system and government spending. As a result, their policies will directly impact

aggregate demand.

The Federal Reserve has indirect control over short-term interest rates, and as a result, their ability to control economic activity is through

aggregate demand.

The aggregate demand-aggregate supply model examines the impact of discretionary fiscal policy and nondiscretionary fiscal policy by focusing on movements of

aggregate demand.

Which of the following will increase macroeconomic equilibrium real gross domestic product?

an increase in government spending

Nondiscretionary Fiscal Policy works by having

both progressive income tax rates take a portion of increased income and welfare programs reduce spending on people when they have increased incomes thereby dampening periods of economic growth.

Prohibiting the legal sale of a good because of the good's external costs

could lead to more negative consequences of the good's sale and use because of criminal activity.

The enormous budget deficits of 2009 through 2011 meant that the federal government was borrowing upwards of $1.5 trillion per year. If that borrowing had limited the ability of the private sector to get financial capital for its purposes, economists would call this

crowding out.

In the market for a foreign currency, the curve that represents the "willingness of those who have U.S. dollars to trade them for the foreign currency" is the

demand curve.

Adjustments to tax and spending policies serve as primary elements of

discretionary fiscal policy.

Programs such as Social Security and Medicare

do not require re-authorization.

If the market exchange rate of yen per dollar rises, this means the

dollar has strengthened, and the yen has weakened.

Externalities are effects of a transaction that ________ people who are not part of that transaction.

either help or hurt

The introduction of e-cigarettes provides a substitute for regular cigarettes. The result is likely that the

elasticity of demand increases.

In reaction to the recession of 2001, a tax cut was passed in which tax rebate checks were sent to millions of American families. This was intended to

increase aggregate demand.

The U.S. budget

is never truly balanced but historically surpluses are less common than deficits.

When examining the "right tax" on a good that produces an externality, the tax should be such that

it is exactly equal to the externality.

If one country determines it wants a fixed exchange rate with another

it must stand ready to purchase or sell its own currency in the market to maintain the desired exchange rate.

In the market for a foreign currency, a "strengthening" of the dollar corresponds to a

lower dollar price of foreign currency.

One typical response to a recession using discretionary fiscal policy is to

lower taxes and increase spending.

Projections of the trajectory of discretionary relative to mandatory spending made in 2016 had

mandatory spending's portion growing.

The existence of the federal income tax and the welfare system serve as the primary elements of

nondiscretionary fiscal policy.

An argument has been made that the shrinking deficits of the 1990s were attributable to the

peace dividend that resulted from the end of the Cold War.

A political problem with discretionary fiscal policy is the

political business cycle.

A tax on a good whose production causes pollution will

raise the equilibrium price and lower the equilibrium quantity.

Externalities are effects of a transaction on

someone other than the buyer or seller.