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
