1. T/F Most tax payments increase as GDP increases. 2. T/F Government spending i
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Question
1. T/F Most tax payments increase as GDP increases.
2. T/F Government spending influences spending indirectly.
3. T/F During the 2008 presidential campaign, candidate Barack Obama argued in favor of repealing the majority of the Bush tax cuts in order to increase government revenue.
4. T/F Workers in high-wage countries cannot improve their real income when they trade with low-wage countries.
5. T/F In 2007, the value of the American dollar rose relative to the euro.
6. T/F If British government bonds pay a higher interest rate than U.S. government bonds, the dollar shoud appreciate.
7. In the short run, tax cuts that are intended to increase aggregate supple have
a. almost no effect on aggreagate demand, and a small effect on aggregate supply.
b. about an equal effect on both aggregate demand and aggregate supply.
c. a much greater effect of aggregate demand than on aggregate supply.
d. almost no effect on aggregate supply, and a negative effect on aggregate demand.
8. A deficit nation in a fixed exchange rate system can improve its balance of ayments by increasing _____
9. One method for a deficit country to correct the situation under a fixed exchange rate system is to _____.
10. The decline in the value of the dollar from 1985 to 1988 was beneficial to _____
11. The different effects of fiscal and monetary policy in an open economy with mobile capital hinges on their different effect on _____
12. The saving rate in the United States fell to nearly zero in the early 2000s. One of the contributing factors to this development was the _____.
13. Why do economists insist on emphasizing the difference between money and income? Why is this difference important in macroeconomics?
14. Suppose that a tariff is imposed on imports of minivan. Show graphically what the effect is in terms of price and quantity of imports. Be sure that your graph is completely and correctly labeled. What determines how much of the tariff is paid by the buyers of the minivan?
15. Suppose a Lexus LS400 and a Mercedes C300 are considered to be of equivalent value. The Lexus sells for 6,000,000 Japanese yen in Tokyo and the Mercedes sells for 50,000 euros in Stuttgart. Using the purchasing power parity theory, explain the exchange rate between the yen and the euro.
Explanation / Answer
01) false , Tax changes have very large effects: an exogenous tax increase of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent."
2) true, Governments directly and indirectly influence the way resources are used in the economy. A basic equation of national income accounting that measures the output of an economy—or gross domestic product (GDP)—according to expenditures helps show how this happens:
GDP = C + I + G + NX.
3) True
4) False, Workers in high-wage countries can improve their real income when they trade with low-wage countries.
5) false, in 2007 a euro was worth $1.44 by December 2007.
6) False, the dollar depriciate
7) c. a much greater effect of aggregate demand than on aggregate supply.
8) by increasing imports the balance-of-payments approaches zero
9) Increase or decrese interest rate based on market situations
10 ) to reslove trade between two countries
12) increasing returns / increasing bond rates
13) Money is an intangible concept, which means it cannot be touched, it cannot be smelled; however it can be seen in terms of numbers. These days everything runs online, so if you transfer money from one account to another account, the only difference is in the numbers. You don’t actually see the tangible money or you cannot physically touch the money. That’s what money is! It is a concept that is used to describe a medium to exchange commodities. Originally, we used to have a barter system which would require trading one commodity for another. However, in today’s fast paced world, not everyone works or deals in commodities. Also, it would become a very time consuming job having to barter for every single thing. Hence, money makes it easier to trade one commodity against money, which can then be traded for another commodity or service.
Income is defined as the consumption and savings opportunity that is gained following deducting all necessary expenses. The money that is saved after all the expenses have been deducted is considered as an income. The term also has other definitions including how much money is earned from the salary. According to the Principles of Economics, for household and individuals the term can also refer to “income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received... in a given period of time.”
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