texal pools

The creation of a need for an alternative rationing is an unintended, yet harmful, effect of

Price Ceiling

The creation of a need for an alternative rationing device is an unintended, yet harmful, effect of

Price ceilings

Use this table (notice that I've already calculated the inflation rates for you, so you don't need to do any calculations) to identify what this economy is experiencing in year 4: Year Inflation Rate 1 6.2% 2 9.8% 3 12% 4 0% 5 2%

Price stability

Nominal GDP in Dogtopia was $6 trillion last year and $7 trillion this year. Which one of the following is correct?

Since the question reports nominal GDP we can't tell what happened to output in Dogtopia over this time period.

Sarah lives in Country Y. her nominal income was $40,000 last year and is $35,000 this year. Which one of the following is correct?

Since this question reports her nominal income, we cannot tell whether she has more or less purchasing power now

Nominal GDP in dogtopia was $6 trillion last year and $7 trillion this year. Which one of the following is correct?

Since this question reports nominal GDP we can't tell what happened to output in Dogtopia over this time period

Whenever there is a price ceiling, the quantity supplied at the controlled price will be ____ the equilibrium quantity

Smaller than

If a blouse is made 40% in the U.S. and 60% in China then

The entire value of the blouse is included in U.S. GDP

In country X, a particular waffle maker used to sell for $20 twenty years ago and now still sells for $20. Which one of the following statements is correct?

We can't tell

International Harvester produced 50,000 tractors last year and sold 45,000 of them. The other 5,000 of them

are counted in last year's GDP as spending on inventory investment

When deciding whether to support a price control, economists say that we should look at

both the benefits and the costs of the price control

In the circular flow diagram, when business firms borrow money in financial markets, they use that money to buy

brand-new capital equipment

Some cities have laws against raising the price of bottled water and building supplies after natural disasters. These laws are designed to help

buyers

Scott received 12 paychecks last year, each for $10,000. to find his real income you should multiply $10,000 by 12.

false

"Capital equipment" is defined as

finished goods that will stay at the production facility and be used to produce other goods

For simplification, the circular flow diagrams that we use assume that all taxes are paid by

households

For simplification, the circular flow diagrams that we use generally assume that all imports are bought by

households

Who owns the resources in our economy? (Hint: Think of how we represent this on the circular flow diagram.)

households

The money spent by the regulated firms and individuals on compliance when the government intervenes in the economy is a

indirect cost of intervention

use this table.... in year 2

inflation

Suppose we know the following: exports = $10; gross private domestic investment = $30; imports = $20, consumption expenditures = $60; government expenditures = $20. How big is GDP?

$100 GDP = consumption + investment + government spending + (exports - imports)

Zachary earned $50,000 in 2015 when the CPI was 300. Now the CPI is 480. How much money does he need to earn in order to have the same living standard that he had back in 2015

$80,000

What is the inflation rate from 2018 to 2019 in Dogopia? CPI in 2018 = 240 CPI in 2019 = 230

(230 (cpi1) - 240 (cpi0)) / 240 (cpi0) = -4.2% (inflation rate)

What is the inflamation rate from 2018 to 2019 in Dogopia? CPI in 2018 = 240 CPI in 2019 = 230

-4.2%

When a market is giving us an inefficient outcome, it is easy to determine exactly what the efficient quantity is.

False

A zipper produced in the U.S. this year and bought by an American clothing company for a pair of jeans will be counted in the U.S. GDP for this current year.

False; it is an intermediate good

In the circular flow diagram, the government collects taxes and then spends that money to buy

Government goods and services

Whenever there is a price floor. The quantity supplied at the controlled price will be ____ then the quantity demanded.

Larger than

Are intermediate goods included in GDP?

No

If you buy a used 2015 Honda Civic in 2020, is the purchase included in 2020's GDP?

No

Is your grandfather's Social Security check from the government counted in GDP?

No because it is a transfer payment

Is your grandfather's social security check from the government counted in GDP?

No because it is a transfer payment

Southwest Airlines expanded its fleet this year by buying 7 new airplanes that we produced by Airbus in Toulouse, France. Are these airplanes included in the U.S.'s GDP

No because they are imports

RealGDP in catopia was $4 trillion last year and $7 million this year. Which one of the following is correct?

Output in Catopia over this time period rose

Assume the equilibrium price is $10 and the equilibrium quantity is 500 units. If the government passes legislation stating that charging any price up to $7 is legal, while charging any price over $7 is illegal, then:

it has set a price ceiling

The real price of oranges in Country A fell from $4 per pound last year to $2.56 per pound this year. Which one of the following is correct?

oranges are relatively less expensive this year in Country A

Some cities have laws against raising the price of bottled water and building supplies after natural disasters. These laws are examples of

price ceilings

use this table.... in year 4

price stability

In the circular flow diagram, where do households buy goods and services?

product markets and foreign economies

Owners of capital equipment receive ____ when they sell these resources.

rent

in the circular flow diagram, households are sellers in _____ markets

resource

Business firms buy used capital good in _______ and new capital goods in _______.

resource markets; product markets

In the circular flow diagram, households generally

save money in finacial markets

in the circular flow diagram, households generally

save money in financial markets

If the inflation rate is 10% and the real interest rate is 7% then the nominal interest rate is

10% (inflation rate) + 7% (real interest rate) = 17% (nominal interest rate)

If the nominal interest rate is 7% and the real interest rate is 4% then the inflation rate is

7 - 4 = 3% nominal interest rate - real interest rate = inflation rate

When deciding whether to support a price control, economists say that we should look at

Both the benefits and the costs of the price control

Goods and services that are produced in the U.S. but sold to foreigners are called

Exports

Assume that a market is failing because external costs exists. One way for the government to help move this market closer to the optimal quantity of output is to subsidize the buyers of the good.

False

Assume that a market is failing because one seller owns a substantial amount of the inputs used to produce the good being traded. One way for the government to help move this market closer to the optimal quantity of output is to tax buyers who buy this product

False

Deflation occurs when the inflation rate is greater than zero but smaller than the inflation rate in the previous period

False

Generally, as average per capita GDP increases, incomes of the very poor decreases.

False

If you buy a house in Arlington, TX in 2020 that was originally built in 1999, the purchase is included in 2020's GDP.

False

Inflation makes it easier to interpret price signals

False

Price floors have no benefits

False

Real GDP figures cannot be compared across time because they are denominated in prices, which change across time.

False

Scott received 12 paychecks last year, each for $10,000. To find his real income you should multiply $10,000 by 12.

False

The value of the cleanliness of U.S. rivers and bays is included in GDP

False

Another name for investment goods is brand new capital goods.

True

Assume that a market is failing because of adverse selection problems. One way for the government to help move this market closer to the optimal quantity of output is to use taxpayer dollars to provide more information to market participants

True

Assume that a market is failing because the good traded in the market is a public good. One way for the government to help move this market closer to the optimal quantity of output is to provide the good using taxpayer dollars

True

Both price ceilings and price floors often lead to the desire for more government actions, either to buy the surplus or to manage who gets the quantity offered for sale.

True

Countries that have higher real GDP per capita also tend to have happier people

True

Declines in real GDP tend to be accompanied by increases in unemployment

True

If you buy a house in Arlington, TX in 2020 that was built in 2020, the purchase is included in 2020's GDP

True

Inflation indicates a weakness in the macroeconomy.

True

Money illusion is the situation where people mistake changes in normal prices for changes in real prices.

True

Real GDP per capita is correlated with many of the other things we care about, such as health and life expectancy

True

Since it is impossible to measure the aggregate price level, the best we can do is to measure the price of a subset of goods and hope that it reflects what is happening with the aggregate price.

True

The aggregate price level is the price of all the goods and services produced in the economy

True

The nominal GDP numbers that you saw in your lesson when you visited Table 1.1.5 in the NIPA tables are measured in current dollars which have not been adjusted for changing prices.

True

The only reason to convert nominal GDP into real GDP is so that you can output levels accross time

True

The real GDP numbers thst you saw in your lesson (not while here in the exam) when you visited Table 1.1.6 in the NIPA tables are measures in a base year's prices so as not to confuse inflation with growth of output.

True

To compare our nation's output across time we have to substitute actual prices with a base year's prices so that we won't confuse inflation with output growth

True

Assume that five years ago in country X a gallon of milk solf for $4. Assume that now a gallon of milk sells for $5. Which one of the following statements is correct?

We can't tell from the information given whether milk is more or less expensive than it used to be five years ago

In country X, a particular coffee maker used to sell for $30 ten years ago but now sells for $15. Which one of the following statements is correct?

We can't tell from the information given whether the coffee maker is more money or less expensive than it used to be ten years ago

Are final goods included in GDP?

Yes

British Airways expanded it's fleet this year by buying 7 new airplanes that were produced by Boeing in South Carolina. Are these airplanes included in the U.S. GDP?

Yes because these are exports

British Airways expanded its fleet this year by buying 7 new airplanes that were produced by Boeing in South Carolina. Are these airplanes included in the U.S.'s GDP?

Yes because they are exports (imports are subtracted)

Which of the following are rationing devices?

all of these are rationing devices ( waiting lists lines (or queues) rationing cards that allow buyers to purchase a certain quantity prices )

use this table.... in year 5

disinflation

Assume the market is failing because one seller owns a substantial amount of the inputs used to produce the good being traded. One way for the government to help move this market closer to the optimal quantity of output is to tax buyers who buy this product.

false

Public goods are subject to the principle of rival consumption.

false

Rival consumption means that one person's consumption does not reduce the amount available for others to consume.

false

Assume the equilibrium price is $10 and the equilibrium quantity is 500 units. If the government passes legislation stating that charging any price up to $12 is legal, while charging any price over $12 is illegal, then:

its action won't affect this market outcome since its attempt to control the price of this good is non-binding

Sally could buy a massage for $50 last year and her wage rate last year was $100 per hour. This year her wage rate is $200 per hour and a massage costs $75. Sally complains that massages are more expensive than before. Sally is experiencing

money illusion

When the government promotes competition

more trades are likely to occur

When the government provides a transparent and fair legal system

more trades are likely to occur

Tim earned $50,000 in 2018 when the CPI was 400. Now the CPI is 550. How much money does Tim need to earn in order to have the same living standard that he had back in 2018?

new salary = $50,000 * (550+400)

Assume that a market is failing because of free-riders. One way for the government to help move this market closer to the optimal quantity of output is to collect taxes and use those dollars to produce the good.

true

Assume the market is failing because external benefits exist. One way for the government to help move this market closer to the optimal quantity of output is to subsidize the buyers of the good.

true

Assume the market is failing because the good traded in the market is produced using a common property resource. One way for the government to help move this market closer to the optimal quantity of output is to limit the number of units that can be produced.

true

Prices provide us with important information but inflation makes it harder to decipher what prices are trying to tell us.

true

Owners of labor receive ____ when they sell these resources

wages

Owners of labor receive _____ when they sell these resources

wages

You started a new computer company this year and hired an American contractor to design you company logo. is the value of the logo counted in out GDP?

yes

If your real income last year was $120,000 and your real income this year is $180,000, then

you have more purchasing power than you had last year