Econ 111-Exam 3

Question 1

Who holds the national debt (Who lends to the U.S. Federal Government)?

Answer 1

People, institutions, and other countries

Question 2

What is an IOU?

Answer 2

treasury notes, bills, bands

Question 3

What is the national debt?

Answer 3

About 31 trillion

Question 4

What percentage of who we owe, do we owe to ourselves?

Answer 4

71%

Question 5

Who do we owe?

Answer 5

1. US govt./agencies-29%
2. Debt held by the public- 42%
3. Foreign govt./investors- 29%

Question 6

What is GDP?

Answer 6

The total market value of all real final goods and services produced in the U.S. in a year.

Question 7

When is GDP stats released?

Answer 7

Every 3 months

Question 8

What was the 2021 Nominal GDP?

Answer 8

$22.99 Trillion

Question 9

What does nominal mean?

Answer 9

Current GDP in current prices

Question 10

What is real GDP?

Answer 10

GDP that has adjusted for price level changes

Question 11

What is a price index used for?

Answer 11

To convert nominal to real

Question 12

What is an intermediate good?

Answer 12

A good produced for further processing

Question 13

How much should GDP grow each year?

Answer 13

2% to 5%-short run

Question 14

What is the average GDP growth rate for a long run period?

Answer 14

3%

Question 15

What is a “bad” growth rate?

Answer 15

1% to 2%(anemic)

Question 16

What is a recession?

Answer 16

Two consecutive quarters of falling real GDP

Question 17

What was the official recession date periods?

Answer 17

1990, 2001, 2007, 2020

Question 18

What was the shortest and deepest recession ever?

Answer 18

2020

Question 19

What was the longest expansion of recession in history?

Answer 19

2009-2020

Question 20

What does GDP exclude?

Answer 20

1. Purely Financial Transactions
2. Secondhand Sales

Question 21

What is the GDP equation?

Answer 21

C+I+G+(Xg-M)

Question 22

What does the C in the equation stand for?

Answer 22

Consumer spending

Question 23

What does the I in the equation stand for?

Answer 23

Investment spending

Question 24

What does the G in the equation stand for?

Answer 24

Government spending

Question 25

What does the Xg in the equation stand for?

Answer 25

Exports

Question 26

What does the M in the equation stand for?

Answer 26

Imports

Question 27

What is the largest component of total spending?

Answer 27

Consumer spending

Question 28

What do households spend on?

Answer 28

1. Durable goods 2. Non-Durables 3. Services

Question 29

What are the factors that determine consumption?

Answer 29

1. Income 2. Prices 3. Wealth Effects 4. Credit Condition 5. Current Household Debt Level 6. Taxes 7. Expectations/Uncertainty

Question 30

What does more income mean?

Answer 30

More consumption

Question 31

What does more saving mean?

Answer 31

Less consumption and less income

Question 32

What is wealth?

Answer 32

The value of assets such as stock portfolios and retirement accounts and the value of real assets-your home, & car.

Question 33

What is the best measure of wealth?

Answer 33

Net worth

Question 34

What encourages consumer spending regarding credit?

Answer 34

Easy credit and low rates

Question 35

What discourages consumer spending regarding credit?

Answer 35

Low credit and easy credit

Question 36

If the household debt burden is low, what will households do?

Answer 36

Households may borrow to fund consumer expenditures

Question 37

If the household debt burden is high, what will households do?

Answer 37

Households may decrease current spending to pay off past consumer spending

Question 38

What does a tax change cause?

Answer 38

Disposable income is increased

Question 39

What will happen if the tax is increased?

Answer 39

Decrease in consumer spending

Question 40

What will happen if the tax is decreased?

Answer 40

Increase in consumer spending

Question 41

What do businesses spend on?

Answer 41

1. New tools, equipment, machinery, factories 2. Residential investment 3. Changes in Inventory

Question 42

What does an increase in inventory do to GDP?

Answer 42

Inventory is added to GDP

Question 43

What does a decrease in inventory do to GDP?

Answer 43

Inventory is subtracted from GDP

Question 44

Which GDP component fluctuates the most?

Answer 44

Investment spending

Question 45

What are the determinants of investment spending?

Answer 45

1. Expectations 2. Interest Rates 3. Technology and Innovation

Question 46

What are interest rates?

Answer 46

The price you pay to borrow

Question 47

How is government spending determined?

Answer 47

Political Arena

Question 48

What is the number one federal outlay?

Answer 48

Transfer Payments

Question 49

What is the number one source of federal taxes?

Answer 49

Income Taxes

Question 50

What are the state outlays/expenditures?

Answer 50

1. Education 2. Public Warfare

Question 51

What are the local outlay/expectations?

Answer 51

1. Education 2. Welfare, Health, Hospitals

Question 52

What are the local tax revenues?

Answer 52

1. Property Taxes 2. Sales and Excise

Question 53

What does an increase in government spending do to GDP?

Answer 53

Increases GDP

Question 54

What does a decrease in government spending do to GDP?

Answer 54

Decreases GDP

Question 55

What are exports?

Answer 55

Total value of goods & services that we sell to others outside of the U.S.

Question 56

What are imports?

Answer 56

Total value of goods & services that we buy from others outside of the U.S.

Question 57

What are net exports(Xn)?

Answer 57

The difference between exports and imports

Question 58

What is a trade surplus?

Answer 58

Xn is positive

Question 59

What is a trade deficit?

Answer 59

Xn is negative

Question 60

What is a tariff?

Answer 60

Tax on imports paid by the consumers

Question 61

Where are tariffed goods produced?

Answer 61

Internationally

Question 62

Who oversees the tariff code?

Answer 62

The U.S. Department of Customs

Question 63

Who buys our stuff?

Answer 63

1. Canada 2. Mexico

Question 64

Who do we buy stuff from?

Answer 64

1. China 2. Mexico

Question 65

What are some GDP issues to remember?

Answer 65

1. Non-Market Transactions 2. Underground Economy 3. Per Capita Output

Question 66

What is the per capita output equation?

Answer 66

GDP/population

Question 67

What does ceteris paribus mean?

Answer 67

All things remaining equal are the same