Economics 111 Exam #2 || A+ GRADED
Economic Role of Government correct answers 1) Establish Suitable Framework
2) Provide Collective Goods and Services
3) Correct for externalities
4) Promote Competition
5) Promote Macroeconomic Stability
6) Redistribution of Income
Externality correct answers An uncompensated gain or loss imposed on one by the
maximizing behavior(making life better) of another
Negative Externalities correct answers Air pollution, water pollution, visual pollution, noise
pollution
*Free market will over produce negative externalities and under-produce positive ones
Policies to deal with Negative Externalities correct answers 1) Regulations on behavior
(EPA)
2) Taxes and/or subsidies
3) Redefine the property rights
Monopoly correct answers One Seller
Oligopoly correct answers A few sellers
Monopsony correct answers One buyer (as bad as a monopoly)
Oligopsony correct answers A few buyers
Macroeconomic Stability correct answers Avoid or minimize inflation/deflation
Avoid or minimize business cycles
Monetary Policy correct answers Quantity of money in circulation and interest rates
Fiscal Policy correct answers Congress and President - Gov't spending and taxes
Medicare correct answers Age 65 gov't health insurance
Medicaid correct answers Low income health insurance
Budget Deficit correct answers This year's government spending minus this year's tax
revenue
New National Debt correct answers Last year's national debt plus this year's budget deficit
Unemployment Rate correct answers 4.9% - 50-60 thousand people surveyed a month
(Doesn't tell the full story)
Uses of CPI correct answers 1) Convert nominal income to real income
Economic Role of Government correct answers 1) Establish Suitable Framework
2) Provide Collective Goods and Services
3) Correct for externalities
4) Promote Competition
5) Promote Macroeconomic Stability
6) Redistribution of Income
Externality correct answers An uncompensated gain or loss imposed on one by the
maximizing behavior(making life better) of another
Negative Externalities correct answers Air pollution, water pollution, visual pollution, noise
pollution
*Free market will over produce negative externalities and under-produce positive ones
Policies to deal with Negative Externalities correct answers 1) Regulations on behavior
(EPA)
2) Taxes and/or subsidies
3) Redefine the property rights
Monopoly correct answers One Seller
Oligopoly correct answers A few sellers
Monopsony correct answers One buyer (as bad as a monopoly)
Oligopsony correct answers A few buyers
Macroeconomic Stability correct answers Avoid or minimize inflation/deflation
Avoid or minimize business cycles
Monetary Policy correct answers Quantity of money in circulation and interest rates
Fiscal Policy correct answers Congress and President - Gov't spending and taxes
Medicare correct answers Age 65 gov't health insurance
Medicaid correct answers Low income health insurance
Budget Deficit correct answers This year's government spending minus this year's tax
revenue
New National Debt correct answers Last year's national debt plus this year's budget deficit
Unemployment Rate correct answers 4.9% - 50-60 thousand people surveyed a month
(Doesn't tell the full story)
Uses of CPI correct answers 1) Convert nominal income to real income
