Macro economics Test 2

In gdp terms, it is always

Exports - imports

Government purchases include spending on goods and services by

federal, state, and local governments

Calculating inflation rate is the equation

(Year 2-year1/year 1) X 100

Over the past century, real GDP per person in the United States has grown about _____ percent per year, which means it doubles about every _____ years.

2-3.5

The marginal tax rate on labor income for many workers in the us is...

50%

As the size of a tax increases the deadweight loss from the tax...

Decreases

GDP Consumption is

Household spending on durable and non durable goods as well as household spending on services

Equity deals with

How fairly the pie is sliced

Economists generally agree that _____ is the most important tax

Labor tax

Which of the Ten Principles of Economics does welfare economics explain more fully?

Markets are usually a good way to organize economic activity

If the government quadrupled the tax on gasoline, the deadweight loss from the gasoline tax would

More than quadruple

Laffer Curve

Related income tax rates to total income taxes collected

Efficiency deals with the

Size of the economic pie

GDP equation is

Y=C+I+G+NX

Welfare economics is the study of

how the allocation of resources affects economic well-being

After the terrorist attacks on September 11, 2001, governments within the United States raised expenditures to increase security at airports. These purchases of goods and services are

included in GDP since government expenditures on goods and services are included in GDP

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

increase tax revenue and decrease the deadweight loss.

What happens to consumer surplus if the price of a good increases?

it decreases

Government purchases include spending on goods and services by

local, state, and federal governments

Deadweight loss measures the

loss in a market to buyers and sellers that is not offset by an increase in government revenue.

willingness to pay

measures the value that a buyer places on a good

The cpi is used to

monitor changes in the cost of living

For the purpose of calculating GDP, investment is spending on

new capital equipment, inventories, and structures, including new housing

real interest rate formula

nominal interest rate - inflation rate

Inefficiency exists in an economy when a good is

not being produced by the lowest-cost producers.

If the tax on a good is doubled, the deadweight loss of the tax

quadruples

A nation's standard of living is best measured by its

real GDP per person

Producer surplus

the amount a seller is paid for a good minus the seller's cost of providing it

The larger the deadweight loss of a taxation

the larger the cost of any government program

GDP

the market value of all final goods and services produced within a country in a given period of time