Str8 Fact

Question 1

Over the last few decades, the US has spent what percent of time in recession?

Answer 1

10%

Question 2

Since the 2008 recession, economic growth has been around….

Answer 2

2%

Question 3

Most of the increase in the deficit from 2007 to 2013 is due to…

Answer 3

spending rising

Question 4

at the end of 2012, a tax cut that wealthy americans had expired, the extra tax dollars that this cut would estimatedly bring in would fuel the government spending for…

Answer 4

8 days

Question 5

what percentage of the federal budget do we currently spend on interest on the debt?

Answer 5

5%

Question 6

For the purpose of paying Social Security benefits, the relevant amount in the Social Security Trust Fund is..

Answer 6

$0

Question 7

A president that significantly reduced income tax rates was

Answer 7

Kennedy and Reagan

Question 8

the cigarette tax is…

Answer 8

regressive

Question 9

Value Marginal Product (VMP) is the ……….

Answer 9

demand for labor, because VMP is the marginal product of a worker multiplied by the price of the output.

It slopes downward because of the Law of Diminishing Returns

Question 10

The labor supply curve slopes……

Answer 10

Upward

Question 11

unemployment rate

Answer 11

Unemployed / Civilian Labor Force

Question 12

A high unemployment rate is consdiered

Answer 12

5.5%

Question 13

Labor Force Participation Rate

Answer 13

Labor Force / Civilian Non-Institutional Population

*measures how many people are interested in holding a job.

Question 14

What is U6?

Answer 14

The unemployment rate including those who have stopped looking for jobs and those who are part time but would like to be full time.

Question 15

Frictional Unemployment

Answer 15

occurs because of the normal workings of the labor force, with people changing jobs and entering the labor force with new skills

Question 16

Structural Unemployment

Answer 16

occurs due to changes in the labor force that render some skills obsolete

Question 17

Cyclical Unemployment

Answer 17

What we usually think of as unemployment, occurs due to contractions during the business cycle.

Question 18

Full employment exists when…

Answer 18

There is no cyclical unemployment

Question 19

Say’s Law

Answer 19

Supply creates it’s own demand.

If you supply a good, you demand something of equal value in return.

Question 20

Real Business Cycle Theory

Answer 20

Much of the business comes from real shocks to productivity

Question 21

Recessionary Gap

Answer 21

The difference between Potential GDP and actual GDP in a recession

Keynes

Question 22

Inflationary Gap

Answer 22

When actual GDP is higher than Potential GDP due to inflation

Keynes

Question 23

Keynes’ Fiscal Policy

Answer 23

Government spending more than it taxes (running deficits) in order to combat a recessionary gap

Government taxing more than it spends in order to combat an inflationary gap

Question 24

Economic Stimulus act of 2008

Answer 24

Authorized sending “tax rebate” checks to taxpayers of $300-$1200

Question 25

The Data Lag

Answer 25

the time it takes to realize there is a problem

Question 26

The Legislative Lag

Answer 26

The time it takes for government to devise a solution to a problem

Question 27

The Transmission Lag

Answer 27

The time it takes to complete a solution to a problem

Question 28

The effectiveness lag

Answer 28

The time it takes for a completed solution to effect the economy fully

Question 29

Permanent Income Hypothesis

Answer 29

a change in someone’s after tax income will affect their behavior if the change is PERMANENT, but not if it is temporary

Question 30

Supply Side Economics recommends changes in…..

Answer 30

Marginal Tax Rates- because they change as income, investment or other value-creating activities change

Question 31

Lump Sum Tax Cut

Answer 31

a temporary tax cut that does not affect ones spending behavior

Question 32

Broad Based Tax Cuts

Answer 32

affect wide ranges of economic activity

Question 33

Targeted Tax Cuts

Answer 33

affect only narrow categories of economic activity and may not give incentive to create value

Question 34

Explain the idea behind the Laffer Curve

Answer 34

once taxes are increased so highly, people are going to be less willing to work, so they won’t work, and the government cant tax their labor, so tax rates will decrease

Question 35

Net Public Debt

Answer 35

The percentage of debt that the government owes others, NOT ITSELF

Question 36

Static Scoring

Answer 36

assumes that individuals will not change their spending behavior if taxation or spending changes

Question 37

Dynamic Scoring

Answer 37

looks at the effects of past legislation to determine what the effects of new legislation will be

Question 38

How does the US current spending break down?

Answer 38

60% Social Security, Medicare, Medicaid, Unemployment Insurance

20% National Defense

5% interest on the national debt

15% everything else

Question 39

The end of social security was put off because of what two reasons

Answer 39

Baby Boom

Women entering the workforce

Question 40

Hauser’s Law

Answer 40

“we cannot balance our spending problems with tax increases after a certain point”

No matter how high TAX RATES go, TAX REVENUE will always be around 17%-18%

if we are to close an income gap, it must be through spending cuts

Question 41

Proportional Tax

Answer 41

tax rate is the same at all income levels

Question 42

Progressive Tax

Answer 42

tax rate rises as income rises

Question 43

Regressive Tax

Answer 43

Tax rate rises as income falls

Question 44

Describe Milton Frieman’s advise on Spending, Taxes or Deficits.

Answer 44

Because it is so inefficient for one person to spend another’s income on a third party, it is better to lower spending than to lower deficits, so that increased production can eventually help pay off the deficit.