Final

Question 1

GDP

Answer 1

Includes borders, current market value, and a one-year time frame. Goods and Services of Final Goods, not intermediate goods. Nominal or Current-dollar GDP. How big a country is.

Question 2

Things that GDP are NOT

Answer 2

Illegal goods, used goods, personal service, stocks, bonds, social security (transfer payments), medicare, medicade, food stamps, unemployment checks.

Question 3

Real GDP

Answer 3

Only looks at growth rates. Used to measure units value w/o inflation distortion. What GDP would be if prices remained same as base year amount.

Question 4

Real Per Capita GDP

Answer 4

GDP / Population. Well being of people in a country

Question 5

Economic Growth

Answer 5

% in Real GDP (DOES NOT SAY HOW WELL PEOPLE ARE DOING)

Question 6

The US spent _____% of time in a recession over the last 6 decades

Answer 6

10%

Question 7

Recession

Answer 7

2 quarterly periods (3 months) of negative economic growth

Question 8

Since the recession in 2008, the econ has grown at about_____

Answer 8

2%

Question 9

Econ growth is NOT a cause of inflation, but a ____

Answer 9

short run result of money growth

Question 10

VMP(Marginal Product) =

Answer 10

Demand for labor

Question 11

Labor supply depends on

Answer 11

Value of alternative uses of peoples time

Question 12

With human Capital is the subject matter important?

Answer 12

YES

Question 13

With Screening is the subject matter important?

Answer 13

NO

Question 14

More capital in a country….

Answer 14

is good for labor b/c it makes labor more productive

Question 15

Unemployed

Answer 15

Everyone NOT employed, but made specific efforts to find a job in previous 4 weeks

Question 16

Employed

Answer 16

Worked @ least 1 hour for pay in previous week. NOT paid for work in families business, but worked for at least 15 hours

Question 17

CNIP

Answer 17

16+ not in military or not institutionalized.

Question 18

Civilian Labor Force =

Answer 18

employed + unemployed

Question 19

Unemployment Rate =

Answer 19

unemployed/ labor force (unemployed + employed)

Question 20

Labor Force Participation Rate =

Answer 20

Labor Force/ CNIP (people wanting to hold a job)

Question 21

Frictional Unemployment

Answer 21

1) likely to rise during economic good times
2) not a serious problem
3) occurs because people change jobs or enter the labor force

Question 22

Structural Unemployment

Answer 22

Sign of moving economy. Rises out of changes in
Taste
Technology
Trade

Question 23

Potential GDP

Answer 23

Point on PPF curve

Question 24

Wages adjust to ____

Answer 24

eliminate shortages and surpluses

Question 25

Cyclical Unemployment

Answer 25

Typically considered unemployed. Arises due to contractions in the business cycle.

Question 26

Real Business Cycle Theory

Answer 26

Business cycle comes from real shocks to productivity

Question 27

Recessionary Gap

Answer 27

Potential GDP > Real GDP. difference b/w potential GDP and recessionary equilibrium. Exists when there is a surplus in labor market.

Question 28

Inflationary Gap

Answer 28

Potential GDP < Real GDP. difference b/w potential and real. Unemployment rate < Natural Rate. Run surplus.

Question 29

Keynesian fiscal policy would dictate

Answer 29

running deficits during a recession. Putting money into econ. to create jobs and end unemployment.

Question 30

Crowding Out

Answer 30

Increase in interest rates = less investment for private businesses and firms. Also the result of borrowing.

Question 31

Policy that aims for long-term growth

Answer 31

Supply Side Economics

Question 32

Supply Side Economics

Answer 32

Decrease cost of value creation through production and trade. The government may decrease taxes and regulations to increase ability and incentives to produce and trade.

Question 33

Data Lag

Answer 33

Time it takes to realize there is a problem

Question 34

Legislative Lag

Answer 34

Fighting on how to spend and tax

Question 35

Transmission Lag

Answer 35

Time to execute

Question 36

Effective Lag

Answer 36

Time for effectiveness to kick in

Question 37

Quick Fiscal Policy

Answer 37

2.5 years

Question 38

Fiscal Policy

Answer 38

Create inflation or redirects spending

Question 39

Permanent Income Hypothesis

Answer 39

Change is someone’s AFTER tax income will affect their behavior if an increase is permanent, but not if the increase is temporary.

Question 40

SSE only recommends

Answer 40

Marginal Tax rates = Change as income, investment, or other desired value creation activities change.

Question 41

Laffer Curve

Answer 41

Shows relationship b/w tax rates and tax revenues

Question 42

Deficit

Answer 42

When a state spends more than it receives in taxes in ONE year.

Question 43

Fed debt

Answer 43

Total amount state owes (total amount of gov. bonds outstanding)

Question 44

Net Public debt

Answer 44

Portion of the debt US gov owes to others

Question 45

Net public debt as a % of GDP

Answer 45

80% - same as 1950

Question 46

What % do we spend on interest on the debt

Answer 46

5%

Question 47

Currently, we spend =

Answer 47

60% SS, Medicare, Medicade, welfare
20% Defense
5% interest and debt
15% Everything else

Question 48

Cigarette Tax =

Answer 48

Regressive

Question 49

Hauser’s Law -

Answer 49

Can’t balance spending problems with tax increase. Close gaps with spending cuts, not tax increase

Question 50

US gov is spending ___ of GDP > ____ taxes of GDP

Answer 50

25 and 16

Question 51

Sales Tax =

Answer 51

Regressive

Question 52

Income Tax =

Answer 52

Progressive

Question 53

NOT ALL FED TAXES ARE _____

Answer 53

regressive

Question 54

Milton Friedman criterion says to

Answer 54

better to lower spending than to lower deficits