ECON 200 Final

If the nominal interest rate is 6% and the inflation rate is 6%, the real interest rate is:

0%

Mr. Lee has a total income of $120,000, a taxable income of $90,000, and pays $30,000 in taxes. What is his effective tax rate?

25%

Mr. Lee has a total income of $120,000, a taxable income of $90,000, and pays $30,000 in taxes. What is his nominal tax rate?

33.33%

At the beginning of 2002 the CPI was 169.3. At the end of 2002 it was 176.1. What was the approximate rate of inflation in 2002?

4%

The 20% of families with the lowest income in the US receive approximately ________ of the total income.

4%

What is a century long trend in the US?

A decline in manufacturing

What are predictable effects of price ceilings?

A decrease in quantity supplied, and increase in quantity demanded, a market shortage

If a price ceiling is to be effective, it should be set:

Below the equilibrium price, and it will create a market shortage

Investment is the:

Expenditure on a new plant, equipment, and structures plus changes in business inventories

Net domestic product is defined as:

The amount of new output currently available for use without reducing the economy's stock of capital

Depreciation represents:

The consumption of capital in the production process

The per capital GDP will always rise when:

The rate of economic growth exceeds the rate of population growth

If a lawyer makes $100,000 and pays $5,000 in taxes while a teacher makes $35,000 and pays $5,500 in taxes, this is an example of:

Vertical inequity

The marginal tax rate indicates:

What percent of the last dollar of income earned is paid in taxes

A computer manufacturer sells PCs to retail stores for $395 each. If the manufacturer pays $200 for the components in each computer, the value added to each computer by manufacturing is:

$195

A lower quantity demanded of a good reflects, ceteris paribus:

A higher price of the good

When technological change allows a smaller amount of a resource to be used in producing two goods shown on a production-possibilities curve, there will be:

An outward shift of the production possibilities curve

During the period between the early 1970s and 1980, the real GDP grew at a faster rate that the nominal GDP. This is an indication that:

Average price levels dropped

Which of the following is an example of a direct income transfer? A. A paycheck from the postal service B. Social security pensions C. A payment to a member of the US army

B

Which of the following is not a final good or service? A. A printing press purchased by a printing company B. Automobile batteries purchased by a car manufacturer C. Gasoline purchased for personal use by a car manufacturer D. The preparation of your tax return by a CPA

B

Which of the following is purchased in a factor market? A. A bag of jellybeans B. The labor of a university professor C. National defense D. A motorized scooter

B

What is the formula for finding national income?

GDP - (depreciation: gross investment - net investment) - net foreign factor income

The price index that refers to all goods and services produced is the:

GDP deflator

A leftward shift of the market supply curve, ceteris paribus, causes equilibrium price to:

Increase and quantity to decrease

If for a given year gross investment is $240 billion and depreciation is $200 billion, then for that year the capital stock:

Increased by $40 billion

The value of final output produced in a given period, measured in current prices, refers to:

Nominal GDP

What would occur if police protection was marketed entirely as a private good?

Only those that could afford police protection would receive it

The production possibilities curve can be used to illustrate the concept of:

Opportunity cost

In a market economy, what is an incentive for producers to produce efficiently?

Proft

The US federal income tax is a:

Progressive tax

If the price level is falling:

Purchasing power increases

The imposition of a payroll tax will:

Raise the cost of labor, shift the labor supply curve to the left, and result in fewer workers being employed.

An increase in deductions, exemptions, and credits in the tax code will:

Reduce the tax base

State lotteries are a form of taxation that is:

Regressive

Suppose that if your income is $20,000, your tax is $2,000, but if your income is $100,000, your tax is $9,000. Such a tax is:

Regressive

Assume the CPI increases from 100 to 120 and a person's nominal income increases from $20,000 to $24,000 over the same period. This person's real income has:

Remained the same

A shift in supply is defined as a change in:

Supply because of a change in a non-price determinant

If tax loopholes are allowed, the:

Tax base decreases

If there is a shortage at a given price, then:

That price is less than the equilibrium price.

Assume the marginal tax rate is 12% for the first $40,000 of income, 28% for income between $40,000 and $100,000, and 30% for any income over $100,000. If Tanisha has income equal to $120,000, what is her tax bill?

$27,600

Ceteris paribus, if the price of Swiss cheese falls, then we will see:

An increase in the quantity demanded of Swiss cheese

Suppose SUVs cost consumers $35,000 and trucks cost $20,000. What contribution does the production of 100 SUVs and 100 trucks make to the GDP?

$5,500,000

If the price level is 100 for 1999 and the price level is 103.3 in 2001, a nominal GDP in 2001 of $8,800 billion would mean that real GDP in 2001 (in 1999 prices) would be closest to:

$8,518.9 billion

The term externalities refers to:

All costs and benefits of a market activity borne by a third party

Unemployment of labor and other resources is represented by:

All points inside the production possibilities curve

Assume that pencils and pens are substitutes. If the price of pencils rises, then we will see

An increase in the demand for pens

Which of the following is an example of a public good? A. Education B. Social security payments C. Flood control D. All of the above

C

The primary function of taxes is to:

Correct inequalities in the distribution of goods and services

Wealth A. Represents a stock of potential purchasing power B. Is the market value of assets C. Tends to be distributed much less equally than income D. All of the above

D

Assume two goods are substitutes. Ceteris paribus, a decrease in the price of one good will cause the equilibrium price of the other good to:

Decrease and the equilibrium quantity of the other good to decrease

Assume a series of forest fires reduces the supply of lumber, which is an input in the production of wooden bats. Baseballs and wooden bats are complements. If the price of wooden bats increases, we can expect the

Demand for baseballs to decrease

Horizontal inequity can be determined by comparing the:

Effective tax rates for two taxpayers with the same nominal incomes

If Alejandra makes $46,000 per year as a nurse and pays $7,000 in taxes while Emily makes $46,000 per year as a high school teacher and pays $6,500 in taxes, this is an example of:

Horizontal inequity

The difference between personal income and wealth is that:

Income is a flow, while wealth is a stock

An economy with nominal tax rates significantly higher than effective tax rates has:

Loopholes in the tax code

If the market mechanism causes the economy to arrive at the wrong mix of output, there is:

Market failure

Government antitrust activity against Microsoft in the late 1990s was the result of which type of market failure?

Market power

The production possibilities curve indicates the:

Maximum combinations of goods and services an economy can produce given its available resources and technology.

The term "nominal income" refers to:

Money income measured in current dollars.

Are stocks and bonds investments as economists use the term?

No

The term transfer payments refers to

Payments to individuals that are not in exchange for current goods and services being produced.

Those who are interested in assessing the relative standard of living of different countries over a given time period are most likely to look at:

Per capita GDP

The GDP per capita:

Permits comparisons of the economic welfare of different nations

What is the definition of disposable income?

Personal income - personal taxes

Personal income is:

The income received by households before payment of personal taxes

The production possibilities curve is bowed outward because of:

The law of increasing opportunity costs

The market demand curve for a particular good indicates:

The total quantities that buyers are willing and able to purchase at alternative prices in a given period of time, ceteris paribus

The GDP is:

The total value of all final goods and services produced within a nation's borders in a given year.

An increase in the supply of gasoline, ceteris paribus, will cause equilibrium price:

To fall and quantity to rise

Ceteris paribus, if the price of basketballs rises, then we will see:

a movement to the left along the demand curve for basketballs

Production processes that use a high ration of capital to labor inputs are referred to as:

capital-intensive

What is the formula for finding GDP?

expenditures for consumer goods and services + gross investment + government purchases + exports - imports = GDP

What is the formula for converting nominal GDP into real GDP?

real GDP = nominal / (current price index/base price index)

What is the formula for effective tax rate?

taxes paid / income

What is the formula for nominal tax rate?

taxes paid / taxable income

What is human capital?

the knowledge and skills a worker gains through education and experience