ECON 30, 33 PT 2

19 November 2022
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41 test answers

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If South Dakota's governor reports a budget surplus in 2011, that state government likely:
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received more in taxes than it spent in that year.
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is created each time the federal government spends more than it collects in taxes in each year.
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Budget deficit
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a __________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes
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progressive tax
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The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy.
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an expansionary fiscal policy; an increase in government spending
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If a government reduces taxes to increase the level of aggregate demand, what type of fiscal policy is being used?
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expansionary
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are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.
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Automatic Stabilizers
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During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:
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aggregate demand curve will shift to the right.
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When inflation begins to climb to unacceptable levels in the economy, the government should:
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use contractionary fiscal policy to shift aggregate demand to the left.
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Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would
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expansionary fiscal policy; lead to a budget deficit
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National debt refers to the total amount that the government has borrowed over time. (T/F)
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True
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The stimulus package of 2009 is an example of discretionary fiscal policy. (T/F)
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True
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Which of these changes would have a bigger impact on state and local government budgets than on the federal budget?
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an increase in the size of the public school population
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Between 1960 and 2000, U.S. government expenditures have represented about what portion of GDP?
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1/5th
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As federal debt increases, ________ also rise, so that the deficit grows even if other government spending is held constant.
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interest payments
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Federal tax revenue increased from 18.1% of GDP in 1994 to 20.8% in 2000. This was largely a result of _____.
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economic growth
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Suppose the government wanted to address the problem of runaway inflation with discretionary fiscal policy. It would use some combination of ____________.
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higher taxes and lower spending
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Suppose there is currently no gap between the standardized employment budget deficit and the actual budget deficit. In this case, the economy is not being impacted by _____.
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Automatic Stabilizers
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Which of these policy recommendations by an economist is likely to involve the largest time lag?
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cut corporate income tax rates
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Politicians tend to favor expansionary fiscal policies over contractionary fiscal policies because _____.
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tax cuts and spending increases are popular with voters
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Suppose Congress is pursuing an expansionary fiscal policy. A coordinated monetary policy would require the Fed to _____.
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keep interest rates low
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Which of these is the best argument against passing a balanced budget amendment?
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It would severely limit the government's ability to fight a recession.
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Suppose an economy is operating close to potential GDP, and Congress cuts taxes without making an equivalent cut in spending. This will have which effect in the short run?
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Severe Inflation
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When one nation can produce a product at lower cost (or fewer resources) relative to another nation, it is said to have a(n) __________________ in producing that product.
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absolute advantage
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The idea behind comparative advantage reflects the possibility that one party:
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may be able to produce something at a lower opportunity cost than another party.
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Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha
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0.5 apples
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Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Beta
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.25 apples
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Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If Alpha & Beta choose to specialize in the products that they have comparative advantage in, then
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Alpha should produce Apples
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Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If Alpha & Beta choose to specialize in the products that they have comparative advantage in, then
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Beta should produce Oranges
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Based on these production possibilities: Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If Alpha and Beta choose to trade at the rate of 1 Apple for 3 Oranges, then both Alpha and Beta will benefit.
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True
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The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of __________________.
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opportunity cost
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According to international trade theory, a country should:
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export goods in which it has a comparative advantage
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The concept of _________________ means that as production increases, the long-run average total cost of production decreases.
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economies of scale
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Suppose Country A can produce microchips using fewer productive resources than Country B. Country A has what type of advantage over Country B?
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Absolute
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A country that specializes in one type of production and trades for other goods benefits by taking advantage of ____________.
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comparative advantage
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In Country M, the opportunity cost of producing 10 bushels of wheat is 5 bushels of corn. In Country N, the opportunity cost of producing 10 bushels of wheat is 15 bushels of corn. If corn and wheat sell for about the same price per bushel, Country M should _____.
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specialize in the production of wheat and trade for corn with Country N
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Two countries can benefit from trading with each other when _____.
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each specializes in areas where comparative advantages exist
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Country X has a comparative advantage in the production of cotton fabric when it can produce cotton fabric _____.
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more efficiently than it can produce other goods
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Intra-industry trade improves productivity because it allows for _____.
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beneficial specialization
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Suppose a small country has a comparative advantage in the production of consumer electronics, and it has one major electronics firm that produces far more consumer electronics than the population can consume. This country exports a large quantity of consumer electronics but also imports a large quantity. Which statement best explains why the country imports consumer electronics?
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Imports create greater competition in the domestic marketplace.
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Suppose a country decreases its tariffs on imported food products. What effect does this have on that country's market for food products?
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It lowers prices paid by consumers
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Suppose a country increases its tariffs on imported automobiles. Why does this create a trade barrier?
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The tariff makes imported automobiles more expensive for domestic consumers to buy