All American Economy Flashcards

  1. GDP is defined as
    the market value of all final goods and services produced within a country in a given period of time
  2. Deflation means that:
    prices in the aggregate are falling, although some particular prices may be rising
  3. The inflation rate is the
    percentage change in the price level from one period to another
  4. GDP does not reflect
    the sale of intermediate goods
  5. The consumer price index was 181.1 in 2002 and184.0 in 2003. Therefore, the rate of inflation in 2003 was about: 
  6. When the consumer price index rises, the typical family
    has to spend more dollars to maintain the same standard of living
  7. The federal funds rate is the interest rate that
    banks charge one another for loans
  8. If the price level increased from 120 to 129, then what was theinflation rate?
    7.5 percent
  9. The Bureau of Labor Statistics defines the unemployment rate as thepercentage of
    the labor force that is unemployed
  10. Graphically, demand-pull inflation is shown as a:
    rightward shift of the AD curve
  11. Assume that Richard, a factory worker at a steel mill, quits his job because he   hears that other steel mills will pay him more money for the same amount of   work.  This week Richard is considered as:
    frictionally unemployed
  12. Dr. Homer Simpson, a typewriter technician, is laid off becausepersonal computers are a new technology that is now available to the masses. Thatyear, Professor Simpson would be officially counted as
    structurally unemployed
  13. Which of the following is true about the U.S. labor force participation rate since1964?
    • all of the above:
    • it has increased overall,  it has increased for women,  it has decreased for men
  14. A recession has traditionally been defined as a period during which
    real GDP declines for two consecutive quarters
  15. Which of the following statements concerning the relative distribution of income is correct?
    Taxes and transfer payments both decrease the degree of income inequality
  16. Supply-side economics can be described in termsof the aggregate demand and aggregate supply model as an attempt to shift:
    The aggregate supply curve to the right
  17. In his statement before the  National Commission on Fiscal Responsibility and Reform, Chris Edwards states   that there are four types of reform that should be pursued in cutting the   budget. Which of the following is NOT one of those types of reform?
    reducing the national debt
  18. In their statement   before the National Commission on Fiscal Responsibility and Reform, Robert   Greenstein and Jim Horney state their belief that stabilizing the ratio of   debt held by the public to GDP is the right goal, and could be achieved by   limiting annual deficits to ___ percent  of GDP.
  19. In his essay arguing that the   income distribution has become more unequal, James Cypher states that to get   on the bottom rung of the income ladder of the top 10 percent of households   in 2000 required an adjusted gross income of ____ per year, and to get on the   bottom rung of the income ladder of the top one percent of households in 2000   required an adjusted gross income of ____ per year
    $104,000 and $384,000
  20. The unemployment rate understates the true problem of unemployment because of
    • all of the above:
    • the limited hours for some part-time workers,  the plight of discouraged workers,  the plight of people who have given up looking for a job
  21. When referring to GDP over time, we want to use
    real GDP
  22. Which of the following is a tool of (expansionary) supply-side policy?
    decrease in government regulations
  23. Which of the following is a tenet of supply-sideeconomics?
    Decreases in social security, taxes and other business taxes shift the aggregate supply curve to the right
  24. Which of the following is true about theunemployment rate?
    The number in the numerator is also included in the denominator in the ratio
  25. The effects of stagflation include
  26. An   economy previously had 1,000 people in the labor force.  Of those 1,000   people in the labor force 100 were unemployed.  As the economy starts to   pick up 200 previously discouraged workers decide to join the labor   force.  Of the 200 individuals, 150 of them are able to get a job.    What is true about the unemployment rate:
    It went from 10% to 12.5%
  27. An   economy previously had 1,000 people in the labor force.  Of those 1,000   people in the labor force 100 were unemployed.  As the economy starts to   struggle 100 workers in the labor force decide to retire.  Of these 100   individuals, 20 of them were unemployed at the time they decided to leave the   labor force.  What is true about the unemployment rate:
    It went from 10% to 8.9%
  28. Which of the following is correct? A regressive tax
    takes a larger percentage of income from low income people than high-income people
  29. What is one of the lessons that we have learned from talking about hyperinflation?
    It is a symptom of a rapid increase in the money supply
  30. Which causes greater expansion of the economy?
    an increase in government spending financed by government borrowing
  31. Statistical discrimination
    involves judging prospective employees on the basis of their group rather than individually
  32. Among the effects of discrimination are
    the national output is less than it could be
  33. Which of the following is not a reason as to whythe aggregate demand curve is downward sloping?
    The substitution effect that says if a price ofone good increases we will shift our purchases to other goods that are relatiely cheaper
  34. Census data comparing earnings by gender and race
    must be interpreted cautiously because culture and individual choice may explain some of the observed differentials
  35. When we graph the aggregate economy in classwhat does the horizontal axis most likely represent?
  36. What effect will the elimination ofenvironmental regulations most likely have on the aggregate economy:
    Increase output, increase employment, decrease price level
  37. Which of the following do you think is most likely the goal is of supply side economics:
    Decrease unemployment, decrease the price level and increase output
  38. If you wanted to measure growth in the US economy from one year  to the next what is true about calculating this growth using real GDP in lieu  of nominal GDP?
    Real GDP will remove inflation so we can measure how the economy actually grew
  39. Which of the following was not a major factor during the most recent financial crisis?
    High interest rates
  40. Price supports:
    increase pollution because supports encourage the cultivation of marginal land and the use of more pesticides and fertilizers
  41. The misallocation of resources associated with price supports:
    affects both domestic and foreign economies
  42. Equilibrium price and quantity will be:
    $3; 65,000
  43. If the government supports the price of wheat at $5 (price floor), therewill be a:
    surplus of 25,000 units of wheat
  44. The twin problems of the U.S. health care industry are:
    rapidly rising costs and unequal access to health care
  45. The largest share of government payments to farmers have gone to: 
    large farms and agribusiness
  46. Because there has been extensive technological change in agriculture:
    over time, supply has increased more than demand
  47. When we say that price supports interfere with the rationing function of price, we mean that:
    price supports do not allow the price to fall to the equilibrium level, thereby eliminating the surplus
  48. Target prices differ from price supports in that:
    • all of the above:
    • target prices indirectly subsidize both domestic and international buyers,  no surplus is created,  it is easier to calculate the cost of the policy than with price supports
  49. Which of the following is not a major contributorto world hunger?
    insufficient food production
  50. In general, which of the following is not a liberal suggestion for agricultural policy reform?
    the government should decrease or end farm programs
  51. What do physicians’ sovereignty and third-party payment have in common?
    They both increase the demand for health care
  52. Among the problems associated with U.S. health care is that:
    significant numbers of uninsured people lack access to the healthcare system
  53. What factor below encourages an over-allocation of resources to health care?
    Third-party payment
  54. Defensive medicine:
    increases the demand for health care
  55. Which of the following have frequently been suggested as ways to slow down increases in U.S. health care costs?
    Managed care plans instead of traditional fee-for-service insurance
  56. What portion of U.S. total health spending ispaid for by private and public insurance? 
  57. The U.S. beer industry is a good example of:
    an oligopoly
  58. Compared to competitive markets, monopolies charge:
    higher prices, produce less output, and make higher profits
  59. When economists say that health care services are overconsumed, they mean that: 
    some resources now used in the health care industry could produce alternative goods and services that society values more highly
  60. Given the availability of the Medicaid program, why are so many poor peopleuninsured? 
    Because many poor people earn enough that they do not qualify for Medicaid
  61. Which of the following best describes the market of a commodity such as wheat?
    the inelastic demand means that a bumper crop will most likely decrease farmers incomes 
  62. With supply restriction programs, the supply curve of agriculture continued to increase.  Which   of the following reasons would you give to explain this result:
    Farmers did not farm on their less fertile land and over-farmed the fertile land
  63. Price discrimination is:
    charging different prices to different customers when the price differences are not based on cost differences
  64. Economies of scale over a wide range of output:
    mean that cost per unit of output is lower at high levels of output
  65. The essence of market power is:
    the firm’s ability to influence the market price of its product
  66. When we say that the competitive firm is a price taker, we mean that:
    the output of the firm is too small to influence the market price of the product
  67. Which of the following is true about target prices with deficiency payments:
    Farmers like them because they receive a higher price for their product and sell more of their product
  68. A major difference between social insurance and public assistance programs is that:
    social insurance covers the entire eligible population, but public assistance coversonly the needy
  69. The long-run problem of Social Security is that:
    the ratio of workers to recipients is declining
  70. Atax takes $2,000 from Joe whose total income is $20,000. The tax takes $3,000 fromJames whose income is  $40,000. The tax is:
  71. What is the four firm concentration ratio for the beer industry if there are 5 firms in the industry and the percentage of output produced by the firms is 8%, 12%, 25%, 33% and 22%?
  72. When do natural monopolies exist?
    When there is a large decreasing average cost curve associated with the industry
  73. In the Taking Sides essay,   “Is Obamacare a Disaster for the Economy,” the authors discuss the history of   health care legislation, and mention that Medicare and Medicaid became law   under who’s administration.
    President Johnson
  74. In her essay, “Top 10   Disasters of Obamacare,” Kathryn Nix does not include which one of the following in her top 10 list?
    Increase Medicare costs
  75. What is the goal of a monopoly?
    To maximize profits
  76. Which of the following are true about Social Security:
    • all of the above:
    • It’s the largest government program in the world,  It is primarily funded through FICA,  It was originally signed into law by FDR as part of the New Deal
  77. If Judy makes $50,000 a year and Ron makes $200,000 and they have to pay a tax through FICA to fund Social   Security.  Which of the following would you say is most likely the case given how the current tax works:
    A smaller percentage of Ron’s income will go toward the tax
  78. Which of the following best explains a way in which Social Security, in general, is regressive:
    On average wealthy people live longer so they can tap into these benefits for a longer period of time
  79. Price and quantity supplied are _____ related, and price and quantity demanded are _____ related.
    positively, negatively
  80. The next question refers to the following production possibilities curve for medical care and education.If the economy is at point G, it represents:
    an impossible point to reach with available resources.
  81. The next question refers to the following production possibilities curve for medical care and education.Point E represents:
    an efficient use of society’s resources.
  82. The next question refers to the following production possibilities curve for medical care and education.If the economy is at point C, the opportunity cost of 40 additional units of medical care will be:
    10 units of education forgone
  83. When the demand curve shifts to the left, we say that:
    demand has decreased.
  84. When we say “all other things equal” with regard to demand and supply,we mean that:
    factors other than price that could affect quantity demanded or supplied do not change.
  85. A neighborhood group initiates a “neighborhood watch” program. Elladoesn’t take part in the program, but she enjoys the greater security theprogram provides. Ella is a:
    free rider
  86. The best way of evaluating crime prevention programs from an economicperspective is to look at their:
    benefits and costs.
  87. We generally assume that legalization of drugs would ________ the supplyof drugs in the market.
  88. Suppose that people find out that eating morebeef negatively impacts their health, leading them to decrease their demand for beef. As a result, the equilibrium price of beef ____ and the equilibrium quantity______.
    falls; decreases
  89. If the government were to tax legalized drugs, it would:
    decrease their supply and increase price.
  90. "Because of unseasonably cold weather, thesupply of lemons has substantially decreased." Thisstatement indicates that:
    the amount of lemons that will be available at various prices has declined
  91. An economic argument for the legalization of drugsis:
    drugs would no longer be as profitable for organized crime.
  92. If Maurice has a comparative advantage in theproduction of good X overKristen, then
     the opportunity cost of producing X for Maurice is lower than for Kristen
  93. The Long Island Railroad once asked the New YorkCommerce Commission for a 20% increase in its commuter rates. They argued thatdeclining revenues made this rate increase necessary. Opponents of the rateincrease contended that the railroad's revenues would fall because of the ratehike. It can be concluded that:
    the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic
  94. Assumethat the local government puts a rental ceiling of $400 on the housing marketbelow (click link for graph). What would be the effect?
    a shortage of 200 apartments.
  95. If  your demand for Coca-cola is elastic and the price falls, which of the following is most likely to occur?
    Your total expenditure on Coca-cola will increase
  96. A situation whereby one country can produce a good with lower opportunity costthan another country defines:
    comparative advantage.
  97. If looking at the market for belts, if thepopulation decreases at the same time that belt producers pay higher wages totheir factory workers even though their productivity hasn’t increased, then theequilibrium price _______ and the equilibrium quantity ________.  Assumeperfectly competitive markets.
    is indeterminate; decreases
  98. Producersof U.S. exported products may suffer when the United States imposes traderestrictions on imports because:
    all of the above
  99. restrictions on imports result in:
    all of the above.
  100. At $30 a case, consumers demand 200 cases ofbeer at the distributor.  When the price increases to $40 a case,consumers demand 170 cases of beer.  What is the price elasticity ofdemand (hint: use the formula given during recitation)?
  101. “ Asituation where the prices of a country’s exports decline relative to theprices of its imports” is the definition for:
    declining terms of trade.
  102. At $30 a case, consumers demand 200 cases ofbeer at the distributor.  When the price increases to $40 a case,consumers demand 170 cases of beer.  Demand for beer would be (hint: usethe formula given during recitation)?
  103. In a two-country world consisting of the U.S. and Canada, a decrease in the value of the U.S. dollar means:
    all of the above
  104. Which of the following would most likely be astatement given by Jeannette Wicks-Lim with respect to the minimum wage?
    Wage rates are sticky and the labor market does not clear as do other competitive markets
  105. Which of the following statements most closelyrepresents the ripple effect as stated by Wicks-Lim?
    An increase in the minimum wage not only helpsthose who were previously below the minimum wage but also benefits workers whoare slightly above the minimum wage
  106. Whatdoes Joseph Stiglitz believe to be the primary reason for the lack of progressin the Doha Development Round?
    The refusal of the U.S. and Europe to do anything about their agricultural subsidies hurting farmers in the developing world.
  107. JackShilling argues that due to China’s intervention into the currency exchangemarket, the renminbi is undervalued relative the U.S. dollar by about
    40 percent
  108. Crusoe can collect 10 coconuts per day if he only collects coconuts, or 5 crabs perday if he only collects crabs.  Friday can collect 5 coconuts per day if he only collects coconuts, or 5 crabs per day if he only collects crabs. What is Crusoe’s opportunity cost for collecting an additional crab and what isFriday’s opportunity cost for collecting an additional coconut, respectively?
    2 coconuts ; 1 crab
  109. When drawing a market diagram for the labormarket, it is important to keep in mind what the supply and demand curvesrepresent.  With this said which of the following is correct?
    The demand curve represents firms/employers
  110. Harryproduces 2 balloon rides and 4 boat rides an hour. Harry could produce moreballoon rides but to do so he must produce fewer boat rides. Harry is ________his production possibilities frontier.
    producing on
  111. In the markets for Coca-Cola and Pepsi, assumethat the supply for Coca-Cola increases, the equilibrium price of Pepsi will______ and equilibrium quantity of  Pepsi will ______, ceteris paribus(hint: use two market diagrams, one for Coca-Cola and one for Pepsi)?
    decrease; decrease
  112. If there is an effective minimum wage pricefloor in effect, then which of the following answers best explains the marketdiagram:
    Quantity of labor supplied is greater thanquantity of labor demanded
  113. Whichof the following is more likely to encourage research into new technologies andlower cost methods of meeting environmental quality?
    performance standard
  114. Two reasons that the environmental movement developed in modern, industrializedcountries are that:
    pollution control is a luxury good, and the type of pollutants we have in modern timesare more toxic than pollutants used to be
  115. Which of the following answers most likely explains why a sugar tariff would be placed on foreign countries trying toexport their sugar into the US:
    The impact on US consumers is spread across many consumers and not as noticeable to each consumer, whereas the impact on US sugar producers is more concentrated
  116. Crusoe can collect 10 coconuts per day if heonly collects coconuts, or 5 crabs per day if he only collects crabs. Friday can collect 5 coconuts per day if he only collects coconuts, or 5 crabsper day if he only collects crabs.  Does Friday have an absolute advantagein collecting either good?
  117. Crusoe can collect 10 coconuts per day if heonly collects coconuts, or 5 crabs per day if he only collects crabs. Friday can collect 5 coconuts per day if he only collects coconuts, or 5 crabsper day if he only collects crabs.  Does Friday have a comparativeadvantage in collecting either good.  And if so, in which one?
    yes- crabs
Card Set
All American Economy Flashcards
American Economy