Econ. Test #2

What is (are) the primary reason(s) to trade

- To acquire goods you do not have access too - To acquire goods that you poorly produce - To acquire goods in which you have a limited amount of resources that are needed in the production of the good

Suppose that 1990 is the base year used to calculate the CPI. And the CPI in the year 2000 is 110. What is the value of the CPI in 1990?

100

GDP/GNP formula:

C + I + G + ( X - M ) C = consumption I = investment G = gov't standing or spending X = export spending M = import spending

disposable income:

GDP plus savings, minus taxes

The major difference between GNP and GDP is?

GNP measures all spending done by entities affiliated with the nation in question, while GDP focuses in on aggregate spending within the borders of a country

Tariffs are more favorable to an importing country than quotas because:

Tariffs help the importing country through increased taxation revenue

Suppose that 1990 is the base year used to calculate the CPI. And the CPI in the year 2000 is 110. How much of a C.O.L.A. adjustment will you receive?

a 10% increase in the nominal wage

According to the circular flow diagram, one possible cause of higher rates of inflation is

a decrease in demand for imports by domestic consumers

Which of the following caused the NRU to increase during the 1970s?

a larger percentage of frictionally unemployed women

inflation:

a situational increase in the average price level - there's ALWAYS a comparison

direct tax:

a tax apposed right on the person, ex- income tax

indirect tax:

a tax placed on an economic activity, if you don't partake in the activity you don't pay it, ex- sales tax, gasoline, alcohol, insurance

flat-rate tax:

all people pay the same percentage regardless of income level

progressive income tax:

as incomes increase, so will an individual's tax burden

regressive tax:

as your income increases, your tax burden goes down

Which of the following best defines the business cycle?

fluctuations in the economy's GNP

GNP:

has to be affiliated with the "club"

If a country has a trade surplus its economy will experience:

inflation and decreased unemployment

injections:

investments, gov't spending, and exports

LFPR ( Labor Force Participation Rate ):

labor force/ population (10)

frictional unemployment:

measures the people who are between jobs or those entering the labor force

structural unemployment:

occurs when the job requirements change, but a workers skill level does not

Kramer earns $80,000 annually and Newman earns $160,000 annually. Kramer pays $16,000 in taxes while Newman pays $2,000 in taxes, the income tax system is:

regressive

leakages:

taxes, imports, and savings

If Fiat, a European car manufacturer, opens a plant in Georgia which of the following would occur:

the GDP of the United States would increase

The unemployment rate that exists when the economy is at a peak of the business cycle is:

the natural rate of unemployment

Police Officers on average received wages of $10,000 per year in 1964. In 1994 the average wage of police officers was $50,000. Using 1964 as the base year, and if the CPI in 1994 was 840. You can conclude that:

the real wage of police officers on average decreased between 1964 and 1994

cyclical unemployment:

unemployment that is pegged to an economy's business cycle, seasonal hiring

vat tax:

value added tax, high value/ quality items will have a higher added tax

If the rate of inflation is 10% and the growth rate of nominal income is 5%, real income:

will fall