Econ test 2
At this equilibrium in the labor market the real GDP is trillion.
$11.25, refer to the chart
Jarius's marginal tax rate is
20 percent
Calculate the inflation rate from 2019 to 2020.
20.37% 2020/2019
Which of the following factors will shift the short-run aggregate supply curve but not the long-run AS?
An economy wide increase in wages.
Which of the following will occur when aggregate supply remains stable but aggregate demand increases in the short run?
An inflationary gap is created.
A weakening of the value of this nation's currency in terms of other countries' currencies affects both the SRAS curve and the AD curve.
B, AD increases and SRAS decrease
In the widget market, it is known that producers are relatively responsive to price changes, as compared to consumers. The government places a $5 per unit tax on sales of widgets. Which of the following is the most likely result?
Most of the tax will be paid by consumers.
Which of the following is correct?
Real rate of interest = (Nominal rate of interest −Anticipated rate of inflation)
What determines the total value of annual U.S. GDP?
The spending and production decisions of consumers, firms, governments, and foreigners.
Year to year rightward shifts in long-run aggregate supply leads to
a long-run trend path for real GDP.
calculate real GDP for 2019 and 2020
base year price * the other years quality for all of the rows the base years RGP is the same as nominal GDP 2019 124779 2020 91003
Real GDP is computed by adjusting nominal GDP for
changes in the price level.
In a small town, a rubber manufacturer produces air pollution. If the government does not intervene, the equilibrium price of rubber will be __________, and the equilibrium quantity of rubber will be __________.
less than the socially optimal price, greater than the socially optimal quantity
Government enforced property rights are crucial to economic growth because they
make the returns to risk-taking relatively more certain. B. encourage people to save knowing their wealth will not be arbitrarily confiscated. C. provide incentives for capital accumulation and entrepreneurial activity. D. All of the above.
Externalities would be ( more or less) common in this nation than in a country such as the United States.
more
The lower the rate of interest, the ________ profitable it is to invest and the ________ the level of desired investment.
more, higher
If nominal GDP increases, it is possible that
output has increased. B. both prices and output have increased. C. prices have increased. D. any of the above might have happened.
Economic growth is represented by the long-run aggregate supply curve (LRAS) shifting
outward to the right.
Thus, according to the Keynesian model full employment is
possible but not guaranteed
. A company that had been selling used firearms illegally finally gets around to obtaining an operating license and performing background checks as specified by law prior to each gun sale. As a result of this, GDP
remains unchanged
The corporate income tax in the United States
results in individuals' being doubly taxed on corporate earnings.
Changes in factors of production that influence economic growth will
shift SRAS and LRAS.
A short-lived change in production input prices will
shift SRAS but not LRAS.
Using the line drawing tool, show demand-pull inflation by correctly shifting aggregate demand. Label the new line 'AD1'.
shift demand to the left
Employers match employees' contributions for
social security taxes
Under progressive taxation, as a person's taxable income increases,
the marginal tax rate is always above the average tax rate.
Which of the following events would cause a rightward shift of the LRAS, other things being equal?
the nations capital stock is higher than it was last year
the unemployment rate is calculated as
the number of unemployed/ the number of people in the labor force x100
According to classical economists, aggregate demand primarily determines
the price level
The position of the long-run aggregate supply curve is determined by
the production possibilities curve.
Population growth can have both a positive and a negative impact on economic growth.
true
calculate the unemployment rate
12.96 unemployed/labor force x 100
Calculate NDP
13.8 GDP-depreciation
. Suppose that in 2021, exports fall to $2.2 trillion, imports rise to $3.0 trillion , and gross private domestic investment falls to $2.2 trillion. Calculate GDP in 2021, assuming that other values do not change between 2020 and 202
14.1 make changes and adjust
Christino's marginal tax rate is
15 percent, taxes paid per 1000 dollars
Calculate GDP.
15.2 trillion GDP= Consumption + Government spending-imports + Exports + investment
Suppose that the long-run aggregate supply curve is positioned at a real GDP level of $15 trillion in base year dollars, and the long-run equilibrium price level (in index number form) is 108. The corresponding full employment level of nominal GDP must be
16.2 trillion dollar
Suppose that U.S. consumption spending is $12.1 trillion, gross private domestic investment is $2.3 trillion, government spending is $3.1 trillion, and net exports are −$0.4 trillion. If interest income is $0.8 trillion, depreciation is $0.4 trillion, wages are $11.9 trillion, and rental income is $0.9 trillion, what is the net domestic product? Net domestic products is
16.7 trillion
A senior citizen gets a part-time job at a fast-food restaurant. She earns $9 per hour for each hour she works, and she works exactly 30 hours per week. Thus, her total pretax weekly income is $270. Her total income tax assessment each week is $45, but she has determined that she is assessed $4 in taxes for the final hour she works each week. this persons average tax rate each week is the marginal tax rate for the last hour she works each week is
16.7, her total weekly income/ tax assessment each week 44.4, $4 in taxes or the final hour she works each week/ The amount she earns per hour
If the average annual rate of economic growth is 4 percent, approximately how long will it take for the nation's per capita real GDP to double?
17.5 years
Assume the cost of a market basket in 2018 is $2,000.0. Calculate the cost of the same basket of goods and services in 2017. Calculate the cost of the same basket of goods and services in 2021.
1720, 2017/2018 x price 3060 2021/2018 x price
A senior citizen gets a part-time job at a fast-food restaurant. She earns $9 per hour for each hour she works, and she works exactly 29 hours per week. Thus, her total pretax weekly income is $261. Her total income tax assessment each week is $50, but she has determined that she is assessed $3 in taxes for the final hour she works each week. This person's average tax rate each week is percent. (Round your answer to one decimal place) The marginal tax rateLOADING... for the last hour she works each week is (Round your answer to one decimal place
19.2 33.3
The Keynesian Model was supported empirically by data from the decade of the
1930s
Suppose that in 2019, geologists discover large reserves of oil under the tundra in Alaska. These reserves have a market value estimated at $50 billion at current oil prices. Oil companies spend $1 billion to hire workers and move and position equipment to begin exploratory pumping during that same year. In the process of loading some of the oil onto tankers at a port, one company accidentally spills some of the oil into a bay and by the end of the year pays $1 billion to other companies to clean it up. The oil spill kills thousands of birds, seals, and other wildlife. The combined effect of these events on gdp for the year 2019 was The loss in national welfare will
2 million not be reflected in GDP since it is a non-market transaction and thus is not included in GDP.
During the course of a year, the labor force consists of the same 927 people. Of these, 23 lack skills that employers desire and hence remain unemployed throughout the year. At the same time, every month during the year, 27 different people become unemployed, and 27 other different people who were unemployed find jobs. There is no cyclical unemployment. Calculate the frictional unemployment rate Calculate the unemployment rate. Suppose that a system of unemployment compensation is established. Each month, 27 new people (not including the 23 lacking required skills) continue to become unemployed, but each monthly group of newly unemployed now takes two months to find a job. Calculate the frictional unemployment rate after this change After the change discussed in part (c), calculate the unemployment rate.
2.91% 5.39% 5.83% 8.31%
Suppose that U.S. consumption spending is $13.2 trillion, gross private domestic investment is $3.2 trillion, government spending is $4.6 trillion, and net exports are −$0.3 trillion. If interest income is $1.0 trillion, depreciation is $0.5 trillion, wages are $12.1 trillion, and rental income is $0.7 trillion, what is the net domestic product?
20.2 trillion Calculate GDP and then subtract depreciation
Consider the diagram to the right, and answer the questions below. the base year is
2016, where the two lines overlap
the base year is
2018 where price index = 100
Meg's marginal tax rate is
25 percent
calculate the total number of unemployed people
28.5 labor force - employed adults
Bill lends Joann $1,000 for a year at a nominal interest rate of 6%. If both Bill and Joann expect the inflation rate to be 3% next year, then the real rate of interest is
3%
In a country with a labor force of 200, a different group of 7 people becomes unemployed each month, but becomes employed once again a month later. No others outside these groups are unemployed. unemployment rate The average duration of unemployment in this country is
3.5 one month
An excise tax of $0.40 is levied on a product. As a result of the tax, the market price of the product goes from $2.00 to $2.30. How much of the tax does the consumer pay?
30 cent
Based on data in the table to the right and the rule of 70, if per capita real GDP in Turkey continues to grow at the average rate it has experienced since 1990, about how many years will be required for it to double? If per capita real GDP in Turkey continues to grow at the average annual rate it has experienced since 1990, then based on the rule of 70, it will take about years for it to double.
30.4
What is the total population?
309.4 add the entire table together but not the employed adults bc they are a part of the labor force
If the hourly wage were to change to $6 per hour how many workers would unemployed?
40 million
Suppose that the current price of a tablet device is $300 and that people are buying 1 million tablets per year. The government decides to begin subsidizing the purchase of new tablet devices. The government believes that the appropriate price is $260 per tablet, so the program offers to send people cash for the difference between $260 and whatever the people pay for each tablet they buy. If no consumers change their tablet-buying behavior, this program will cost the taxpayers
40 million
The federal personal income tax accounts for roughly ________ of all federal revenues.
46
The figure to the right shows the relationship between a government's sales tax revenue and its sales tax rate. According to this figure, dynamic tax analysis provides a good approximation of the revenue effects of an increase in the tax rate over the tax rate range from
5 to 8 percent
Based on data in the table to the right and the rule of 70, if per capita real GDP in Canada continues to grow at the average rate it has experienced since 1990, about how many years will be required for it to double? If per capita real GDP in Canada continues to grow at the average annual rate it has experienced since 1990, then based on the rule of 70, it will take about years for it to double.
50, Rule of 70, 70/1.4
Suppose that people end up buying 1.5 million tablets once the program is in place. If the market price of tablets does not change, this program will cost the taxpayers
60 million
What is the total unemployment rate for this country
7.27 add all four unemployment rates together
Calculate the inflation... rate from 2018 to 2019.
8% 2019/2018
Calculate the labor force participation rate
87.4 labor force/adult population x 100 adult population is labor force + nonmilitary non institutionalized adults in the labor force
The following transactions take place in 2000: 1. An elderly couple go to the movies and pay $150 for the tickets. 2. A family sells numerous knick-knacks at a garage sale for $125. 3. A young executive buys 100 shares of IBM for $10,000. 4. A college student receives $800 from his parents. 5. A young couple down on their luck receive food stamps worth $230. 6. A plumber performs work for a neighbor and receives $125 in cash that he doesn't record in his company's records. 7. A physician operates on a friend's husband and charges $2,000 for the operation instead of her usual $5,000. 8. A teenager paints the porch on his parents' house. The paint cost $95. The cost of hiring a professional to do the job would have been $400. 9. A high school graduate works a summer job and makes $7,000. 10. The Federal Reserve Bank sells a bond for $2,000. The addition to gross domestic product is
9,245
Under the assumption that the program causes people to buy 1.5 million tablets and also causes the market price of tablets to rise to $320, this program will cost the taxpayers
90 million
The following table gives the per loaf sales values at each stage of bread production: Stage of Production $ Value of Sales Stage 1: Seed, fertilizer $0.10 Stage 2: Growing $0.22 Stage 3: Milling $0.28 Stage 4: Baking $0.55 Stage 5: Retail price $0.95 The addition to GDP from the production and sale of one loaf of bread is
95 cent
Which of the following is most likely to gain from unanticipated inflation?
A consumer with a five year auto loan.
Which of the following will occur when aggregate supply remains stable but aggregate demand falls in the short run?
A recessionary gap is created.
Suppose that the relationship between the number of workers and real GDP is given by the table below and diagram to the right. the equilibrium hourly wage is blank and the equilibrium number of workers employed in this economy is blank million
$4, where the price interacts $140
Suppose that the government decides to subject producers of this item to a unit excise tax equal to $2 per unit sold. The new equilibrium market price will be and the new equilibrium quantity is
$8 100
Gross Domestic Product
. only includes "final" goods and services to avoid double counting. B. does not include transfer payments or financial transactions. C. does not include the transfer of second-hand goods. D. All of the above.
According to this figure, static tax analysis provides a good approximation of the revenue effects of an increase in the tax rate over the tax rate range from
0 to 5 percent
If you invest $1,000 in a savings account that pays 2 percent annually, your $1,000 investment will have gained the most purchasing power in one year if the inflation rate is
1 percent
The growth rate of real GDP between 2010 and 2011 was
10.21 real GDP 2011 -real GDP 2010/ real gdp 2010 x100
Jim's favorite breakfast is two eggs, 1/5 lb. of bacon, 1/7 lb. of white toast, 1/6 can (16 ounce can) of frozen concentrate orange juice, and 1 lb. of grapefruit. The following table contains 1991 and 2001 prices for these five items. Using 1991 as the base year, compute the price index for Jim's breakfast for 2001. Item 1991 Price 2001 Price One dozen eggs $1.08 $1.02 One pound bacon $2.15 $2.75 One pound bread $0.63 $0.98 One can orange juice $1.98 $1.86 One pound grapefruit $0.57 $0.55
107.5
Calculate real interest rate
11.35 nominal interest rate - inflation rate inflation rte is price index next year divided by price index current year
Corporate income taxes account for
11.5 percent of all federal taxes collected and make up about 2 percent of all state and local taxes collected. Your answer is correct.
Calculate NI
12.9 NDP-non income related taxes net of subsidies
The market is initially in equilibrium where the demand and supply curves intersect. An excise tax has been levied on the good in the diagram to the right shifting the supply curve from S to S + T. What can be said about who pays the tax?
Both the producer and consumer pay a portion of the tax but the producer pays a larger share.
A run of good weather has led to unprecedented crop harvests throughout the country. At the same time, the nation's central bank has significantly pushed down the rate of growth of the nation's money supply.
C, AD decreases and SRAS increase
Suppose Canada spends less per capita on national defense than many other countries of similar size and income. A reasonable economic explanation would be that
Canada is able to free-ride on the defense spending of the United States.
Say's Law fits best in the since this philosophy placed great importance on to determine the .
Classical Theory aggregate supply level of output
Most workers in this nation's economy are union members, and unions have successfully negotiated large wage boosts. At the same time, economic conditions suddenly worsen abroad, reducing real GDP and disposable income in other nations of the world.
E, both lines decrease
What is economic growth?
Economic growth is increases in per capita real GDP measured by its rate of change per year.
Which of the following is not a true statement about the impact of immigration on economic growth?
Economists agree that population growth through immigration is a drain on the economy because it lowers per capita GDP.
Suppose that the position of a nation's long-run aggregate supply (LRAS) curve has not changed, but its long-run equilibrium price level has increased. FACTOR a. A rise in the value of the domestic currency relative to other world currencies b. An increase in the quantity of money in circulation c. An increase in the labor force participation rate d. A decrease in taxes e. A rise in real incomes of countries that are key trading partners of this nation f. Increased long-run economic growth
Factors b, d, and e.
The ________ is a price index measuring the changes in prices of all new goods and services produced in the economy.
GDP delator
Which of the following statements is not true about the use of GDP as a measure of national welfare?
GDP is a useful measure of national welfare since it excludes nonmarket transactions.
Which of the following transactions would not be included in GDP?
Ginie receives a social security payment from the government
According to the circular flow of income and output, which of the following is not true?
Goods, services and money all flow in one direction since money pays for the goods and services.
What is the relationship between tax rates and tax revenues?
Increasing tax rates will initially increase tax revenues. Eventually an increase in the tax rate will erode the tax base and revenues will decrease.
What effect does immigration have on a nation's per capita GDP?
It may increase or decrease per capita GDP depending on the number of immigrants and their skills.
Which of the following is a possible explanation for sticky prices?
Labor contracts cause wages to be fixed over the contract period.
Which of the following will increase labor productivity?
Labor has more physical capital to work with.
An online video game has the technical capability for a large number of players to participate, as long as a game administrator works to assure constant functionality of the game. Adding any additional players deprives no other participants of the entertainment services provided by the online game. It has been easy, however, to set up a system for excluding participation by anyone who fails to contribute $5 per month to a fund that assures covering extra expenses generated by that player's participation. Is this game a public good?
No, this game is not a public good because the exclusion of nonpaying consumers is not too costly to be feasible.
What is the difference between nominal GDP and real GDP?
Nominal GDP is measured in current market prices while real GDP corrects for changes in the overall level of prices from year to year.
Which of the following is not one of the four major assumptions of the classical model?
People suffer from money illusion.
calculate nominal GDP for 2019 and 2020
Price * quantity for every row 2019 73211 2020 91003
Which one of the following is a primary difference between a public good and a private good?
Private goods are subject to the principle of rival consumption while public goods are not.
Using the expenditures approach to national income accounting, which of the following would be counted as consumption?
Resident of NYC buy food ever week
In many countries, education is either wholly provided by the government or is heavily subsidized. How would an economist explain this?
Since education has a spillover benefit, private markets will under provide for it.
Why are politicians and economists concerned about the economic growth rate in the U.S.?
Small differences in the rate of economic growth can make large differences in the standard of living over time.
The two primary money transfer payments in our system are
Social Security old-age and disability benefits and unemployment insurance benefits.
Suppose that a state government implements a tax on mechanics' labor time at all state auto repair shops in order to enhance its tax revenues. One year later the government is disappointed to find that not only is the amount of tax collected small, but that in-state auto repair work significantly declined. This state government apparently utilized which type of tax analysis?
Static tax analysis.
The socially efficient use of bus services may be achieved by which of the following government policies?
Subsidies. B. Government financing and/or production. C. Regulations. D. Any of the above
What is the structure of the U.S. income tax system?
The U.S. income tax system is a progressive tax system where the marginal tax rate exceeds the average tax rate.
Which of the following statements is true?
The U.S. unemployment rate exceeded 25 percent during the Great Depression.
Which of the following explains the difference between the average tax rate and the marginal tax rate?
The average tax rate uses total income while the marginal tax rate refers to the tax rate of the last dollar earned.
An excise tax of 60 cents is levied on a product. As a result of the tax, the price of the product goes from $1 to $1.40. Which of the following is true?
The consumer pays the majority of the tax but not the entire tax.
Suppose that the long-run aggregate supply curve is positioned at a real GDP level of $12 trillion in base year dollars, and the long-run equilibrium price level (in index number form) is 115.
The corresponding full employment level of nominal GDP must be $13.8 trillion dollars RGDP * Pl/ 100
How do the taxes that are levied on goods and services affect market prices and quantities?
The equilibrium quantity will decrease and the market price will increase by less than the amount of the tax.
Which of the following is the most important source of revenue for the federal budget?
The federal personal income tax.
In what sense do consumers of oranges now "pay" for dealing with the spillover costs of pesticide production?
The price of oranges to consumers is higher.
Which of the following best exemplifies Say's Law?
The production of a $4000 plasma TV set creates demand for other goods and services valued at $4000.
How is the federal income tax structured?
The rate at which income is taxed increases as income increases. Up to a limit, additional amounts of income are taxed at ever greater rates.
Unemployment due to the fact that workers must search for appropriate job offers is called frictional unemployment.
True
Compute the unemployment rate and the labor force participation rate. civilian labore force is 147390 civilian employment us 139248 civilian working age population 223318
Unemployment rate = 5.52 percent; Labor force participation rate = 66.0 percent.
The labeled point that corresponds to maximum feasible 2020 production and is more likely to be associated with the curve denoted 2021B, is
X the furthest curve
The labeled point that corresponds to maximum feasible 2020 production and is more likely to be associated with the curve denoted 2021A, is
Y where 2021 a is the middle curve
What is the per capita real GDP in each of these countries
a 5556 b 3053 c 16750 Real GDP (billions)/ Population (million) x 1000 or Real GDP (millions)/ Population (million) x 100
Which of the following would cause an increase in aggregate demand?
a decrease in real intrest rates
Dynamic tax analysis shows that a likely response to an increase in a tax rate is
a decrease in the tax base
According to the classical model, if the economy starts at full employment an increase in aggregate demand will cause all of the following to occur except
a decrease in wage rates.
The aggregate demand curve would shift to the right as a result of
a drop in the foreign exchange value of the dollar.
internet job sites, like Monster.com, have led potential employees to find jobs via the internet almost instantly. This has caused
a fall in frictional unemployment.
Entrepreneurship functions better when
a system of private property rights permits entrepreneurs to capture the rewards from their entrepreneurial activities.
A specified interval of income to which a specific and unique marginal tax rate is applied is called
a tax bracket
All of the following will shift the short-run aggregate supply and the long-run aggregate supply except for
a temporary change in input prices
Subsidizing medical services through Medicare
a. makes medical services available to a large percentage of the population, who otherwise could not afford them. B. drives a wedge between the price received by providers and the price perceived by consumers. a and b
The expenditure approach to tabulating GDP
adds up the total amount spent on newly produced domestic goods and services during the year.
Pollution produced by a factory is being dumped into a local river. The community uses local funds to clean the river. This is an example of
an external cost as the community, not the factory, is paying for the clean up.
Which of the following would cause an increase in long-run aggregate supply?
an increase in the labor force
The classical model assumes that wages and prices
are always completely flexible.
Which of the following government policies might be effective in achieving the amount of orange production that fully reflects all social costs?
both a and c a tax on growers commensurate with the cost to third parties. & Regulations that limit the use of pesticides.
Policies designed to capture the spillover benefits of bus transit affect auto consumers by inducing the substitution of blank transit.
bus for auto
One of the most important factors for economic growth to take place is that a society must
consume less than they produce.
If a household purchases a new car and a new refrigerator, this would be classified as spending on
consumer durables.
Total expenditures for domestically produced goods and services consist of
consumer spending, business spending, government spending, and net foreign spending.
To derive GDP using the expenditure approach, which of the following components are added togehter?
consumption expenditures, gross private domestic investment, government expenditures, and net exports
Mandy has been temporarily laid off during a recession, but expects to be rehired when business picks up. Which type of unemployment is this?
cyclical unemployment
Consider an economy where the natural rate of unemployment is equal to 5%. If the actual unemployment rate is equal to 6%, then
cyclical unemployment rate is 1% .
If the central bank wishes to prevent the equilibrium price level from changing in response to the oil price increase, it should
decrease the quantity of money in circulation in order to shift aggregate demand leftward.
A woman who makes a living charging for investment advice on her Internet Web site marries one of her clients, to whom she now provides advice at no charge. As a result of this, GDP
decreases
Cost-push inflation is caused by persistent
decreases in short-run aggregate supply.
There are simultaneous changes in the demand for and supply of tablet devices, with the consequences being an unambiguous decrease in the equilibrium quantity of these devices but no change in the market clearing price. What changes in the demand for and supply of tablet devices could have generated these outcomes?
demand decreases and supply decreases
A nation's automobile market is depicted in the graph to the right. Suppose their government proposes a policy to subsidize mass transit (bus rides) as means of increasing ridership. Using the line drawing tool, show the likely effect this policy will have on the market for automobiles. Properly label this line.
demand line moves to the left, decreases
Labor productivity is normally measured by
dividing total real domestic output by the number of workers or by the number of labor hours.
f the sales tax increases from 6 percent to 9 percent, the figure's dynamic tax analysis blank the prediction that would have been forthcoming from a static tax analysis because this sales tax increase causes the government's tax revenues to blank instead of blank .
does not accord with decrease increasing
Economic growth as it is currently measured
does not consider spiritual, cultural or social difficulties that may arise from growth. B. does not account for how increased per capita income is distributed across income groups. C. understates actual economic growth since it does not adjust for changes in leisure. D. All of the above.
The shape of the aggregate demand curve (AD) is
downward sloping
Suppose that the aggregate demand changes due to an decrease in the amount of money in circulation. Using the line drawing tool, draw the new aggregate demand curve. Label it AD1.
draw it to the left on the AD, decrease
Population growth generally
encourages technological progress that increases economic growth.
Which of the following factors are highly related to the pace of economic development?
establishing a system of property rights B. limiting protectionism C. developing an educated population D. All of the above.
Mr. Ho spends $10,000 on shares of stock via an Internet trade order. This activity is blank in GDP.
excluded
Mr. King performs the service of painting his own house instead of paying someone else to do it. This activity is blank in GDP.
excluded
Mr. Langham sells a used laptop computer to his neighbor. This activity is blank in GDP.
excluded
Mrs. Ho receives a Social Security payment. This activity is blank in GDP.
excluded
Mrs. King takes photos of planets and stars as part of her astronomy hobby. This activity is blank in GDP.
excluded
A country that saves a larger percentage of GDP than another country will, ceteris paribus
experience higher rates of economic growth since there will be more investment.
A cost or benefit of an economic activity that has an impact on an individual's well-being, even though the individual was not directly involved in the activity, is known as a(n)
externality
Assume that the position of a nation's aggregate demand curve has not changed, but the long-run equilibrium price level has declined. Now consider the following factors: Factors a. An increase in labor productivity b. A decrease in the capital stock c. A decrease in the quantity of money in circulation d. The discovery of new mineral resources used to produce various goods e. A technological improvement Other things being equal, which of these factors might account for this event?
factors a, b, and d
A stonger dollar contributes to inflation.
false
An increase in long-run aggregate supply cuases the price level to increase, and is therefore inflationary.
false
An innovation is the same thing as an invention.
false
Disposable personal income refers to the income used by households for all purchases of nondurable goods during a year.
false
GDP counts intermediate goods because to not do so would result in GDP being undervalued.
false
Governments that wish to maximize their tax revenues need to assess a high tax rate.
false
Governments that wish to maximize their tax revenues should always assess a high tax rate.
false
In percentage terms, the largest positive change in business activity in the United States since 1880 occurred during the 1990s.
false
In the United States, a patent gives the inventor of a product the exclusive right to make, use, or sell the product for 50 years.
false
Individuals who have stopped looking for a job because they are convinced they will not find a suitable one are classified as unemployed.
false
Personal income is the income received by households after personal income taxes are paid.
false
Static tax analysis assumes that tax rates do not change.
false
Structural unemployment is related to the movement of workers from low-paying to high-paying jobs.
false
Transfer payments are money payments made by governments in exchange for goods or services.
false
When the economy is at full employment, the unemployment rate is zero.
false
Whenever inflation rates are overestimated for the life of a loan, creditors lose and debtors gain.
false
in the base year, the price index will always have a value of zero.
false
If the actual price level increases beyond the long-run equilibrium price level, all of the following will tend to occur except
firms offering fewer services than people wish to purchase.
Which of the following is an example of a transfer in kind?
food stamps
The natural rate of unemployment includes
frictional and structural unemployment.
Suppose that in 2019 there is a sudden unanticipated burst of inflation.... Consider the situations faced by the following individuals and determine who gains and who loses due to this inflation. A homeowner whose wages keep pace with inflation in 2019 and makes fixed monthly mortgage payments to a savings bank. As a result of this, the homeowner blanks and the savings bank blank
gains and the loses
In the circular flow of income
households demand goods and services that are supplied by firms, while supplying resources that are demanded by firms.
The knowledge and skills that people in the workforce acquire through education, on-the-job training, and self-teaching is referred to as
human capital
One of the main conclusions of Say's Law was that
if people supply goods in order to then demand goods, there can be no overproduction in a market economy and full employment will be the normal state of affairs.
The long-run aggregate supply curve can shift to the right due to
improvements in labor productivity. B. improvements in technology. C. economic growth resulting from an increase in resources. D. All of the above.
Mr. Ho pays a $10 brokerage fee. This activity is blank in GDP.
included
Mr. King paints houses for a living. This activity is blank in GDP.
included
Mrs. King earns income from parents by taking baby photos in her home photography studio. This activity is blank in GDP.
included
Ms. Chavez makes a $300 payment for an Internet-based course on stock trading. This activity is blank in GDP.
included
E*Trade charges fees to process Internet orders for stock trades. This activity is blank in GDP.
included
If the central bank wishes to prevent the equilibrium real GDP from changing in response to the oil price increase, it should
increase the quantity of money in circulation in order to shift aggregate demand rightward.
If the LRAS shifts to the right over time and during this time AD does not noticeably change, real GDP will ________ and the price level will ________.
increase, decrease
The imposition of an excise tax on a product will ________ the market price of the product and ________ the equilibrium quantity.
increase, decrease
For every 1 percent increase in the stock of research and development in the United States, productivity in the rest of the world
increased by about .25 percent
Many economists view the natural rate of unemployment as the level observed when real GDP is given by the position of the long-run aggregate supply curve There can be positive unemployment in this situation because
information is costly and rigidities always exist causing some types of unemployment (frictional and structural) to occur even in the long run after everyone in the economy has fully adjusted to any changes.
Limiting the immigration of highly educated professionals hurts U.S. economic growth because
it restricts the supply of high human capital workers and the new ideas they could potentially generate. B. it restricts the knowledge base of the workforce. Both A and B
According to the Bureau of Labor Statistics, an unemployed individual whose employment was involuntarily terminated is classified as a
job loser
Correcting negative externalities will result in a new, corrected, market supply curve that is to the
left of the initial curve. This will decrease the output level.
Imposing the $4-per-month unit excise tax causes the market price of telephone services to rise by blank $4 per month.
less than
ased on data in the two tables to the right, if per capita real GDP in Chile continues to grow at the average annual rate it has experienced since 1990, will its per capita real GDP be twice as high as it is today within a decade? If per capita real GDP in Chile continues to grow at the average annual rate it has experienced since 1990, then in 10 years, its per capita real GDP will double.
less than
Many people who do not smoke cigars are bothered by the odor of cigar smoke. Use the accompanying figure showing the market for cigars to illustrate the implications of a failure of the market cigar supply curve to reflect the social or spillover costs of cigar smoking. Using the line drawing tool, locate the approximate position of the true supply curve (the one reflecting both private and social costs). Properly label this line
line goes above the original line
A banker who made a fixed rate auto loan blank, but the auto buyer who will repay the loan at a fixed rate of interest during 2019 blank.
loses and gains
A retired individual who earns a pension with fixed monthly payments from her past employer during 2019 blank but the employer who pays the fixed monthly payment to her blank
loses and gains
An apartment landlord who has guaranteed to his tenants that their monthly rent payments during 2019 will be the same as they were during 2018 blank The tenants who make fixed monthly rent payments blank
loses and gains
In the widget market, it is known that consumers are relatively responsive to price changes, as compared to producers. The government places a $5 per unit tax on sales of widgets. Which of the following is the most likely result?
most of the tax will be paid by producers
To raise funds aimed at providing more support for public schools, a state government has just imposed a unit excise tax equal to $4 for each monthly unit of telephone services sold by each telephone company operating in the state. The diagram to the right depicts the positions of the demand and supply curves for telephone services before the unit excise tax was imposed. Using the line drawing tool, show the position of the new market supply curve now that the tax hike has gone into effect. Properly label this line.
move the supply curve to the left by 4
The World Bank estimates that _______ of the world's people live on less than $2.00 per day.
nearly 10 percent
A nation's capital goods wear out over time, so a portion of its capital goods become unusable every year. Last year, its residents decided to produce no capital goods. It has experienced no growth in its population or in the amounts of other productive resources during the past year. In addition, the nation's technology and resource productivity have remained unchanged during the past year. The nation's economic growth rate for the current year will be
negative
Which of the following is a characteristic of a public good?
no individual can be excluded from the benefits of consuming it
The Keynesian model argues that prices are sticky. One reason supporting this argument is that
nominal wages are inflexible downwards.
If a government wants to obtain the maximum tax revenue it should
not assess the highest possible tax rate.
All of the following transactions are excluded from the measure of GDP except
paying your dentist to have your teeth cleaned.
Per capita real GDP measures the amount of real GDP
per person
The largest component of GDP by far is
personal consumption expenditures.
All of the following would cause the aggregate demand curve to shift except
price level changes.
Classical economists thought that
price, wage, and interest rate flexibility can quickly cure any tendencies for a recession.
An important difference between the Classical Model and the Keynesian Model is that
prices adjust to bring about equilibrium in the Classical Model and output adjusts to bring about an equilibrium in the Keynesian Model.
Suppose the federal government replaced the current income tax system with a system that taxed all income at 20%, but the first $20,000 of income was tax exempt. Such a system would be a ________________ tax system.
progressive
A tax system in which, as income increases, a higher percentage of the income is paid as taxes is known as
progressive taxation
Does Meg experience progressive, proportional, or regressive taxation? increased by 250 per 1000
progressive taxation
Key taxes at the federal level do not include:
property taxes
With respect to the purchased items, a sales tax is a
proportional tax
Does Jarius experience progressive, proportional, or regressive taxation? increased by 200 per 1000
proportional taxation
Find real GDP in each year, and fill in the table
real gdp = nominal GDP/ price index x 100 2010 8608.7 2011 9487.5
Since the nominal wage is deemed inflexible, a decrease in aggregate demand causes firms to
reduce their workforce.
According to the interest rate effect, an increase in the price level
reduces borrowing and spending. B. reduces the aggregate quantity of goods and services demanded. C. increases nominal interest rates. D. All of the above.
The "incidence of a tax"
refers to those who bear the final burden of taxation.
A tax where people with lower incomes pay a higher percentage of their income in tax than do people with higher incomes is called a
regressive tax
Does Christino experience progressive, proportional, or regressive taxation? taxes paid increased by 150 per 1000 income
regressive taxation
A tennis player wins two top professional tournaments as an unpaid amateur, meaning the tournament sponsor does not have to pay out his share of prize money. As a result of this, GDP
remains unchanged
As the dollar becomes stronger in international foreign exchange markets, the short-run aggregate supply curve will shift to the ________ and the aggregate demand curve will shift to the ________.
right, left
For economic growth to take place, a country must save. But, for saving to actually generate economic growth,
saving must be channeled into investment.
The existence of sticky prices causes the fill in the blank to be horizontal.
short tun aggregate supply
If petroleum prices increase temporarily the blank curve would shift to the blank .
short-run aggregate supply left
Which of the following is an example of a transfer payment?
social security
Key taxes at the state and local level do not include:
social security taxes
Total income equals the dollar value of total output because
spending by one group represents income to the other group.
The payment of this tax is
split evenly between consumers and producers.
Which of the following is not a source of funding available to governments?
stock sales
Say's law asserts that
supply creates its own demand.
Suppose that repeated application of a pesticide used on orange trees causes harmful contamination of groundwater. The pesticide is applied annually in virtually all of the orange groves throughout the world. Most orange growers regard the pesticide as a key input in their production of oranges. Show how a tax or regulations on the use of pesticides are likely to affect the market price and equilibrium quantity in the orange market. 1.) Using the line drawing tool, show the effect on the orange market. Properly label this line. 2.) Using the point drawing tool, indicate the new equilibrium price and quantity. Label the point 'E2'.
supply curve is about the original curve and e2 is higher
A proportional tax, or flat-rate tax
takes the same percentage of a person's taxable income in tax regardless of their level of income.
The distribution of tax burdens among various groups in society is known as
tax incidence
Over the long run any government's fundamental revenue sources are
taxes and user charger
The government could best correct this externality by
taxing the production of rubber
The U.S. aggregate demand curve would shift to the left if
the Federal Reserve Board caused the real interest rate to increase.
Suppose that there is a temporary, but significant, increase in oil prices in the economy depicted in the figure to the right. a. Using the 3-point curved line drawing tool, show the impact the elevated oil prices have on the macroeconomy. Properly label this line.
the SRAS2 line goes to the left of the previous line, a decrease
increase the quantity of money in circulation in order to shift aggregate demand rightward. Using the 3-point curved line drawing tool, show the impact the elevated oil prices have on the macroeconomy. Properly label this line.
the SRAS2 line goes to the left of the previous line, a decrease
The primary difference between the aggregate demand curve and an individual demand curve is that
the aggregate demand curve represents total planned expenditures on all goods and services while an individual demand curve represents a single good or service.
Which of the following describes how the excise tax is split between consumers and phone service providers?
the burden of the tax is split evenly
A nation's government has determined that mass transit, such as bus lines, helps alleviate traffic congestion, thereby benefiting both individual auto commuters and companies that desire to move products and factors of production speedily along streets and highways. Nevertheless, even though several private bus lines are in service, commuters in the city are failing to take the social benefits of the use of mass transit into account. The figure to the right shows the market demand and market supply curves for bus rides. 1.) Using the line drawing tool, determine how the market's outcome with respect to output would be impacted if commuters did take into account the social benefits associated with bus ridership. Properly label this line. 2.) Using the point drawing tool, indicate the new equilibrium point. Label the point 'E2'.
the demand curve moves to the right, increases and equilibrium price is higher
In 2002, the price index was 162. In 2003, the price index was 182.
the inflation rate between 2002 and 2003 is 12.35
According to the classical economists,
the interest rate will ensure that the amount households plan to save will equal the amount businesses desire to invest.
he long-run aggregate supply curve will not shift if there is a change in
the price level
Gross domestic product is defined as
the total market value of all final goods and services produced in an economy during a year.
Market failure occurs when
the unrestrained market economy leads to too few or too many resources going to a specific economic activity.
Full employment means
there is a level of unemployment consistent with "normal" frictions in the labor market.
The long-run aggregate supply curve shifts outward when
there is economic growth
The economy of Finlandia is at full employment when
there is some unemployment due to friction in the labor market, but there is no cyclical unemployment.
The long-run aggregate supply curve is determined by
the full-employment level of real output.
When the production possibilities curve shifts outward,
the long-run aggregate supply curve shifts to the right.
Some economists argue that corporate income taxes are typically not paid by the firm, but by
the stockholders, employees, and customers.
The diagram shows that the Nominal GDP curve exhibits a steeper growth path, compared to the Real GDP curve after their intersection. This indicates
this country has experienced inflation since the base year.
From society's point of view, will the market price of cigars be too high or too low
too low
In the absence of any government involvement in the market for cigars, will too many or too few cigars be produced and consumed?
too many
The simple circular flow model shows that
total income received by households must be equal to the dollar value of all goods and services produced.
The average tax rate is the
total tax paid divided by total income.
A positive difference between the purchase price and the sale price of an asset is called a capital gain.
true
According to economist Paul Romer, ideas are what drive economic growth.
true
According to new growth theory, more technological advances will occur when the rewards are greater.
true
Consumer sovereignty means that consumers have the individual freedom to decide what they wish to purchase.
true
Corporate profits are subject to double taxation.
true
Cyclical unemployment results from business recessions.
true
In an open economy, the total value of GDP is based on the spending decisions of individuals, firms, governments, and foreign residents.
true
In general, the more securely private property rights are assigned, the more capital accumulation there will be.
true
Leading indicators are events that have been found to occur before changes in business activities.
true
National income is income earned by all U.S. factors of production.
true
On a national basis, higher saving rates eventually mean higher living standards in the long run, all other things held constant.
true
The classical economists believed that the leakage of saving would be matched by the injection of business investment.
true
The components of GDP as calculated using the expenditure approach are identical to the components of aggregate demand.
true
The difference between real GDP and nominal GDP for the same year reflects the amount of inflation that occurred during that year.
true
The goal of antitrust legislation is to reduce the power of firms that can determine the market price of the goods they sell.
true
The labor force is equal to the number of employed plus the number of unemployed.
true
The limit on government spending and transfers imposed by the fact that every dollar the government spends, transfers, or uses to repay borrowed funds must ultimately be provided by the user charges and taxes it collects is known as the government budget constraint.
true
The lower the price level, the greater the total planned spending on goods and services.
true
The most important tax in the U.S. economy is the federal personal income tax.
true
The shapes of the market demand and supply curves determine who pays most of a tax.
true
There are predictions that computers may become as powerful as the human brain by 2030.
true
The long-run aggregate supply curve (LRAS) is equivalent to the full-employment level of real GDP.
true
Suppose the establishment of a system of unemployment compensation increases to two months the interval that it takes each group of job losers to become employed each month. Nevertheless, a different group of 7 people still becomes unemployed each month. Now the average duration of unemployment is Following the establishment of a system of unemployment compensation, calculate the country's unemployment rate.
two months 7
If everything else remains constant, improvements in labor productivity
ultimately lead to economic growth and higher living standards.
According to modern Keynesian analysis, the short-run aggregate supply curve is
upward slopping
All of the following are benefits of economic growth except
urban congestion
The shape of the long-run aggregate supply curve (LRAS) is
vertical
According to the classical model, if an excess quantity of labor is supplied at a particular wage level, full employment will be maintained because
wages will fall rapidly to permit businesses to continue hiring everyone who wants to work.
a system of private property rights permits entrepreneurs to capture the rewards from their entrepreneurial activities.
without saving, there cannot be investment, and without investment, there will be less economic growth.
A nation's capital goods wear out over time, so a portion of its capital goods become unusable every year. Last year, its residents decided to produce no capital goods. It has experienced no growth in its population or in the amounts of other productive resources during the past year. In addition, the nation's technology and resource productivity have remained unchanged during the past year. Now, suppose that educational improvements during the past year enable the people of this nation to repair all capital goods so that they continue to function as well as new. All other factors are unchanged, however. In light of this single change to the conditions faced in this nation, this nation's economic growth rate for the current year will be
zero
A price index is computed as
(cost of market basket today÷cost of market basket in base year)×100.
Since the 1960s, public spending on education has _________, while student performance has ______________.
increased, remained constant or declined
The number of tablets people will buy as a result of the subsidy will be
more, on the assumption that the demand for tablet devices is downward sloping.
The imposition of an excise tax on a product will shift that product's ________ curve vertically by the exact amount of the tax. This represents ________.
supply; a decrease in supply
The nominal value of anything is its price expressed in ________, and the real value of anything is its value expressed in ________.
today's dollars; purchasing power
Total income can be viewed as the sum of
wages, rents, interest, and profits. B. the dollar value of output produced since total income and total production are equal. C. payments to factor services such as land, labor, capital, and entrepreneurial activity. D. All of the above.