Suppose that the economy is at full employment (our economy has reached its potential GDP or the maximum that we can normally produce)
Economic Scenarios Questions
Suppose that the economy is at full employment (our economy has reached its potential GDP or the maximum that we can normally produce). Now suppose that the Federal Government decides to decrease taxes. If we compare the long run price and GDP levels to the price and GDP levels that existed before the Federal Government’s action, we would find that_______?
A. Production or the GDP would not increase in the long run.
B. Prices would decrease in the long run.
C. A decrease in unemployment would result in the long run.
D. Producers would increase production in the long run as a result of the Federal Government’s actions.
Consider a country that exports good X. We have that______?
A. The domestic producers wins.
B. The domestic consumers wins.
C. The workers in the exporting industry lose.
D. The foreign consumers of the good lose.
If the Fed wants to slow down (decrease production of) the economy that it believes is overheating (producing beyond the potential GDP), which of the following actions will it take?
A. Increase taxes.
B. Increase the reserve ratio.
C. Decrease the discount rate.
D. Buy bonds from the public.
Which of the following justification for trade restriction has the most validity (it should benefit the country that imposes them in the economic sense) if wisely enacted? Imposing trade restrictions because we do not benefit from trade as much as the country that
A. we are trading with.
B. Imposing trade restrictions to help an industry that has very high costs of labor.
C. Imposing trade restrictions to help an infant industry.
D. Imposing trade restrictions to encourage other countries to impose more stringent environmental laws.
When the U.S. imposes tariffs__________?
A. The U.S. producer surplus increases by less than the US consumer surplus decreases.
B. The U.S. producer surplus increases by less than the US consumer surplus increases.
C. The U.S. producer surplus increases by more than the US consumer surplus decreases.
D. The U.S. producer surplus increases by more than the US consumer surplus increases.
Suppose that an increase in the cost of resources increases the cost of production for the U.S. economy. If the Federal Government chooses to combat inflation, which of the following would be the best course of action?
A. Do nothing.
B. Increase expenditure.
C. Decrease corporate taxes.
D. Decrease income taxes.
Which of the following is true about trade restrictions? Imposing tariffs to help save domestic jobs hurt by outsourcing will generally increase the
A. consumer, producer and total surplus of the country that imposes tariffs. Imposing tariffs to help save domestic jobs hurt by outsourcing will generally increase the
B. producer surplus of the country that imposes tariffs. Imposing tariffs to help save domestic jobs hurt by outsourcing will generally increase the
C. total surplus of the country that imposes tariffs. Imposing tariffs to help save domestic jobs hurt by outsourcing will generally increase the
D. consumer surplus of the country that imposes tariffs.
In 2013 the U.S. government removed its tariff on imported ethanol. Removing the tariff benefited ________ of ethanol, and hurt ________?
A. U.S. consumers; no one.
B. U.S. producers; the U.S. government.
C. U.S. consumers; the U.S. government.
D. U.S. producers; foreign consumers.
If the Federal Government wants to stimulate a stagnating economy in recession (it wants to increase production), which of the following actions will it take?
A. Increase the reserve ratio.
B. Increase the discount rate.
C. Sell bonds to the public.
D. None of the answers are actions that it would take.
Which is the most likely outcome if we impose tariffs? Our domestic producers will be able to produce and sell that good at the same price at which
A. we imported the good. Our imports of the good on which tariffs are imposed would decrease by X, and our domestic
B. producers will increase production of that good by the same amount (X) to compensate for the decreased imports.
C. None of the answers are correct.
D. Our domestic manufacturers would be able to export that good to the country on which we imposed tariffs because tariffs will help our domestic producers.
The government engages in fiscal policy when________?
A. Congress extends unemployment benefits during a recession.
B. The IRS collects tax payments every April 15.
C. The Fed engages in Open Market Operations.
D. The Environmental Protection Agency cleans up a toxic waste spill.
Which of the following is correct?
A. A country that imports increases its total surplus, but not a country that exports.
B.A country that imports increases its total surplus, and a country that exports also increases its total surplus.
C.A country that imports decreases its total surplus, and a country that exports increases its
D. A country that exports increases its total surplus, but not a country that imports.
Which is a likely outcome and might serve as an argument against the imposition of a tariff on a country from which we import manufacturing goods because that country can produce them at a lower cost than our domestic manufacturers of that good?
A.The country on which we imposed the tariffs will still be able to export the same quantities of that good to us.
B.Our domestic manufacturers will benefit, create jobs, and our economy will be larger than if we had not imposed that tariff. Another country that can also produce that good at a lower price than our domestic
C. manufacturers will replace the country on which we imposed tariffs and will export (almost) the same amount of the good to us.
D. We will increase our total surplus since revenues will be generated from the tariff.
Consider a country that exports good X. We have that________?
A. The domestic producers win more than domestic consumers win.
B. The domestic producers win more than domestic consumers lose.
C. The domestic consumers win more than domestic producers lose.
D. The domestic consumers win more than domestic producers win.
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