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
