Issues in economics today
If money is moved from a consumer savings account into a consumer checking account,
M1 increases and M2 remains unchanged.
In Figure 5.7, assuming perfect competition, which price(s) is associated with a loss?
MR1 and MR2
If GDP is $10 trillion, Personal Consumption Expenditure is $6.5 trillion, Gross Private Investment is $2.0 trillion, and Government Consumption and Investment Expenditures together are $2.0 trillion,
Net Exports are -$0.5 trillion.
The efforts to reduce the deficit in 2011 can be best thought of as using
None of these options are correct.
Suppose there was a debate regarding how to spend $1 billion in newly found revenues in the budget. Suppose the centrist Democrat suggests an increase to infrastructure spending. Suppose the centrist Republican suggests an increase in cyber-defense spending. The Democrat says that the extra infrastructure spending will decrease travel times and be the most valuable. The Republican is arguing that, on average, cyber-security is worth the money, so more is better. What is going on here?
Only the Democrat is using marginal analysis.
With a reserve ratio of 10%, the banking system can create ________ with each dollar of deposits.
$10
Referring to Table 4.1, Box F should be filled with
$110.
Supposing the market price for a price taking firm is known to be $2, the total revenue accruing to it if it sells 100 is ________ and the total revenue accruing to it if it sells 200 is ________.
$200; $400
Referring to Table 4.2, Box E should be filled with
$3.
If a market basket was defined in 2018 and it cost $10,000 to purchase the items in that basket in 2018, while it cost $12,000 to purchase those identical goods in 2019, then the inflation rate from 2018 to 2019 is
(120-100)/100*100%=20%.
Using Table 6.1, from the 1982-1984 base to 2010, prices increased
121.1%.
If a society has 100 million people over the age of 16, 58 million who are working, and 2 million who are looking for work, with 40 million others neither working nor looking for work, the labor force participation rate is
60% (60/100).
Use the aggregate supply-aggregate demand model to determine which of the following will lead to higher aggregate output.
A cut in interest rates
A decrease in government spending will cause
AD to decrease (move to the left).
A decrease in taxes will cause
AD to increase (move to the right).
An increase in confidence will cause
AD to increase (move to the right).
An increase in input prices will cause
AS to decrease (move up and to the left).
An increase in regulation will cause
AS to decrease (move up and to the left).
An increase in productivity will cause
AS to increase (move down and to the right).
Which of the following policies might create demand-pull inflation?
All of these policies could create demand-pull inflation.
Use the aggregate supply-aggregate demand model to determine which of the following will lead to higher prices.
An increase in government spending
If a supply-side economist were to make a suggestion to stimulate economic activity, which of the following policies would she NOT suggest?
An increase in the minimum wage
Which of the following would qualify as an aggregate supply shock?
An unexpected increase in oil prices
Which of the following would qualify as an aggregate demand shock?
An unexpected reduction in consumer confidence
In Figure 3.2, what is the producer surplus?
BP*C
Suppose there was a debate regarding how to spend $1 billion in newly found revenues in the budget. Suppose the centrist Democrat suggests an increase to infrastructure spending. Suppose the centrist Republican suggests an increase in cyber-defense spending. Each is arguing that their plan will get the most good for the money. What is going on here?
Both are employing marginal analysis, just from different perspectives.
Suppose there was a debate regarding how to spend $1 billion in newly found revenues in the budget. Suppose the most liberal Democrat suggests an increase to Food Stamp (SNAP) allotments. Suppose the most conservative Republican suggests an increase in defense spending. Each is arguing that their plan will get the most good for the money. What is going on here?
Both are employing marginal analysis, just from different perspectives.
In 2018, the trading partner with which the U.S. had the largest trade deficit was
China.
Trade sanctions were effective in removing Iraq from Kuwait after its 1990 invasion.
False
The ________ decides monetary policy.
Federal Open Market Committee
Of the collection of supply and demand diagrams in Figure 2.2, which one shows the result of an increase in the taste for a good?
Figure 1
Of the collection of supply and demand diagrams in Figure 2.2, which one shows the result of a decrease in income if a good is considered normal?
Figure 2
Of the collection of supply and demand diagrams in Figure 2.2, which one shows the result of an increase in the number of sellers in the market for anything?
Figure 3
An economist worrying about the economic impact of environmental regulations would model that impact with a(n)
decrease in aggregate demand.
Suppose a firm cannot figure out whether the demand for the good it sells is elastic or inelastic but discovers that every time it raises its price, its total revenue declines. Their
demand is elastic.
The late-1960's era Johnson 10% tax surcharge designed to curb inflation is an example of
discretionary (and contractionary) fiscal policy.
The portion of US debt owned by the public (non-Federal Reserve)
dropped from the 1940's through the 1970's, spiked in the 1980's, dropped in the 1990's and early-2000, and rose in the 2010's.
The slow growth coming out of the Great Recession caused the Fed to
employ new tools of monetary policy.
Between 2001 and 2003, the Federal Reserve cut interest rates 12 times. This is an example of
expansionary monetary policy.
Supposing a firm is a price taker, the demand for that firm's product is
flat line at the market price.
Tariffs imposed upon Japanese passenger vehicle imports into the U.S. tend to
harm U.S. consumers and help U.S. automakers.
Exports from the United States (as a percentage of GDP) have
increased over the last 50 years.
Suppose there are only two goods (Good A and Good B) and the average person buys 4 of Good A in a year and 3 of Good B. If, in the base year, the Price of Good A is $5 and the Price of Good B is $10, and in the next year the Price of Good A is $4 and the Price of Good B is $12, one problem with the CPI way of calculating inflation is
it fails to recognize that people will substitute (to some degree) Good A for Good B and therefore overstates the degree of inflation.
If an adverse shock reduces the level of aggregate demand, it is likely to lead to
lower Real GDP ("RGDP") and a lower price level ("PI").
Any event that creates a "crisis in confidence" is likely to lead to
lower aggregate prices.
For a given increase in supply, the condition of demand that will result in the most significant change in price is when demand is
perfectly inelastic.
Using Figure 1.7, we know the production of 4 units of soda and 2 units of pizza is
possible, but there would be unemployed resources.
A tariff will typically
reduce the price, net of the tariff, that is received by sellers and increase the price paid by consumers.
The portion of US debt owned by the Federal Reserve
rose from around 6% to around 12% as a result of the Great Recession.
The gap between the ATC and AVC curve will
shrink to nearly zero.
Compared to Italy and Japan, the debt as a percentage of GDP in the US is
substantially smaller.
The institution that governs monetary policy is
the Federal Reserve.
A factor that might have contributed to the weakening of the U.S. economy in 2007-2009 was
the impending expiration of the Bush Tax Cuts of 2003.
Under perfect competition, the supply curve is
the marginal cost curve, but only the portion that is above the minimum of average variable cost.
TARP was
the name given to the bank bailouts.
An example of nondiscretionary fiscal policy would be
the operation of the welfare state.
The key difference(s) between perfect competition and monopolistic competition is
the products sold are slightly different in monopolistic competition.
A decreasing portion of the U.S. national debt is held by
the public.
At any particular quantity on the TC, its slope will be
the same as the slope of the TVC.
The new tools of monetary policy that the Fed employed included
the sustained purchase of mortgage-backed securities.
Referring to Figure 1.4, the opportunity cost of producing the second unit of pizza is
three units of soda.
One factor limiting the Federal Reserve's ability to use monetary policy to stimulate the economy is that the Federal Reserve has
tools to lower interest rates, but they do not work at interest rates below 0%.
The national debt is the
total amount owed by the federal government.
If the price of a good increases by 5% and the quantity demanded decreases by 5%, then at that price, the good is
unit elastic.
Suppose there was a debate regarding how to spend $1 billion in newly found revenues in the budget. Suppose the most liberal Democrat suggests an increase to Food Stamp (SNAP) allotments. Suppose the most conservative Republican suggests an increase in defense spending. The Republican says that, on average, military spending does the most good, so more is better. The Democrat is arguing that the extra food purchased by the extra spending will increase well-being the most. What is going on here?
Only the Democrat is using marginal analysis.
Suppose there was a debate regarding how to spend $1 billion in newly found revenues in the budget. Suppose the centrist Democrat suggests an increase to infrastructure spending. Suppose the centrist Republican suggests an increase in cyber-defense spending. The Democrat says that, on average, infrastructure spending does the most good, so more is better. The Republican is arguing that the extra cyber-security purchased by the extra spending will increase well-being the most. What is going on here?
Only the Republican is using marginal analysis.
Suppose there was a debate regarding how to spend $1 billion in newly found revenues in the budget. Suppose the most liberal Democrat suggests an increase to Food Stamp (SNAP) allotments. Suppose the most conservative Republican suggests an increase in defense spending. The Democrat says that, on average, Food Stamp spending does the most good, so more is better. The Republican is arguing that the extra security purchased by the extra spending will increase well-being the most. What is going on here?
Only the Republican is using marginal analysis.
In Figure 5.5, a monopolist would charge which price?
P3
In Figure 5.1, what output would a perfect competitor produce?
Q2
Which of the following programs is on-budget?
Student loans
If the demand curve for a firm's output is P=200-10Q, the total revenue curve will be
TR=200Q-10Q2.
In which of the decades below was the deficit as a percentage of GDP the largest?
The 1980s
Suppose there was a debate regarding intelligence budgets and the Democrat was arguing for a budget increase from $40 billion to $41 billion and the Republican was arguing for the budget to increase to $45 billion. Further, suppose intelligence salaries and procurement of the same spy systems are project to rise 5%. The Republican accuses the Democrat of proposing a cut to intelligence gathering which, the Democrat insists his plan increases that spending. What is going on here?
The Democrat is cutting only if you use current services budgeting.
Suppose there was a debate regarding military budgets and the Democrat was arguing for a budget increase from $400 billion to $405 billion and the Republican was arguing for the budget to increase to $425 billion. Further, suppose military salaries and procurement of the same weapons systems are project to rise 2%. The Republican accuses the Democrat of proposing a cut to the military while, the Democrat insists his plan increases military spending. What is going on here?
The Democrat is cutting the military only if you use current services budgeting.
Suppose there was a debate regarding Medicaid budgets and the Democrat was arguing for a budget increase from $400 billion to $500 billion and the Republican was arguing for the budget to increase to only $410 billion. Further, suppose health care costs are projected to remain constant though the number of eligible people is projected to rise 10%. The Democrat accuses the Republican of proposing a cut to health care while, the Republican insists his plan increases Medicaid spending. What is going on here?
The Republican is cutting Medicaid only if you use current services budgeting.
Suppose there was a debate regarding student financial aid budgets and the Democrat was arguing for a budget increase from $40 billion to $50 billion and the Republican was arguing for the budget to increase to only $41 billion. Further, suppose college costs were project to rise 10%, even with the same number of students. The Democrat accuses the Republican of proposing a cut to education while, the Republican insists his plan increases education spending. What is going on here?
The Republican is cutting education only if you use current services budgeting.
In Table 17.2, Brazil has (U.S has coffee=3 and apple =3, brazil has 2 and 1)
a comparative advantage in coffee but not an absolute advantage.
An example of discretionary fiscal policy would be
a federal jobs program adopted to stimulate consumption.
In Figure 5.1, what profit would a perfect competitor earn?
a positive profit
If supply increases and the price doesn't change, there will be
a surplus.
Short-run expansionary Fiscal Policy would result in
aggregate demand moving to the right.
Using the aggregate supply-aggregate demand model, the tax cuts of 2001 and 2003 that came in the form of tax rebate checks would cause
aggregate demand to shift to the right.
A strengthening of the dollar will immediately shift
aggregate demand to the left.
A budget surplus is the
amount by which revenues exceed expenditures.
In Table 17.1, Brazil has (in this one U.S has coffee=2 and apples=4, while brazil has 4 and 2.)
an absolute and comparative advantage in coffee.
If it takes one country one unit of labor to produce either a computer or a TV, but it takes the other country two units of labor to produce a computer and only one to produce a TV, then the first country has
an absolute and comparative advantage in production of computers.
Monetary policy designed to counteract a reduction in aggregate demand might include
an increase in the money stock.
Banks with excellent credit can borrow ________ from the Federal Reserve.
an unlimited amount
If the reserve ratio is .05, the money multiplier can be as high
as 20.
Prior to 1950, for most of the years in which there were deficits, we were also
at war.
The argument that a Balanced Budget Amendment would be "pro-cyclical" means that it would cause
bad times to be worse than they would otherwise be.
The stimulus package adopted in 2009 by newly-elected President Obama included
both discretionary and non-discretionary fiscal policy programs.
Prior to the recession of 2007-2009,
both revolving and non-revolving debt were rising rapidly.
Suppose you can fly from your home city to New York but only one airline provides the service. This market would be described by
monopoly.
On a supply and demand diagram, a tariff works by
moving the supply curve vertically up by the amount of the tariff.
The elements of the stimulus package adopted in 2009 that allowed states to pay Medicaid providers despite having exhausted their funds, should be considered
non-discretionary fiscal policy.
A country that is limiting imports of a good by requiring a lengthy inspection process is using
non-tariff regulatory barriers.
The portion of the Obama stimulus package that bolstered state Medicaid plans is best thought of as
nondiscretionary fiscal policy.
With 125 million people working, 8 million out of work and looking for work, and 147 million neither working nor looking for work, "underemployment" would be illustrated by
part of the 125 million holding part-time jobs when they were qualified for full-time jobs.
If there is no change in demand that will cause a change in the price, then the supply for the good is
perfectly elastic.
