PUP 3002 TEST 2 QUESTIONS WITH VERIFIED SOLUTIONS GRADED A+
What is economic growth? - Answers The increase in the market value of the goods and
services produced by an economy.
A recession is... - Answers A negative growth rate.
Economic growth is measured by... - Answers The percent rate of increase in growth domestic
product (adjusted for inflation) or 'real GDP'
The employment rate is... - Answers Ratio that measures the proportion of the country's working
-age population that is employed.
Inflation is... - Answers The purchasing power of money.
Inflation is often caused by... - Answers Increases in the production of money or excess money
in the economy.
Balance of trade involves... - Answers Imports and exports
Positive balances in trade are desirable because... - Answers A country is less dependent on
others for products services.
The Classical, or Laissez-faire model states that... - Answers We should rarely intervene;
Supply and demand are natural regulatory tools
The economy regulates itself.
Keynesian approach... - Answers - Encourages deficit spending
- Government spending as a means by which to curb recessions (especially in the creation of
public sector jobs)
- Argues that austerity increases the burden on citizens and prolongs recessions
How do we 'manage' the economy? - Answers - Monetary Policy
- Fiscal Policy
- Regulation
Monetary policy involves... - Answers Managing the supply of money.
Monetary policy is carried out by... - Answers The Federal Reserve
Main job: setting the discount rate
Fiscal policy involves... - Answers Taxing and Spending
, Fiscal policy is carried out by... - Answers The President and Congress
In a proportional tax system.... - Answers Everyone, regardless of income, pays the same
fraction of income in taxes (Russia, Saudi Arabia, Ukraine, Estonia)
In a regressive tax system... - Answers Poor entities pay a higher fraction of their income in
taxes than do higher-income entities (Ex: Sales Tax; Sin Taxes)
In a progressive tax system... - Answers Lower-income entities pay a lower fraction of their
income in taxes than do higher-income entities. (US, UK, France)
Regulation involves... - Answers Government intervention in the decisions that firms make or in
market outcomes.
Rawles (1971) "Veil of Ignorance" - Answers - Decisions should be made without individual
concern or knowledge of their position in society.
- Maximize the resources—benefits, rights, and so on—available to the least well off in society
so as to ensure a floor for the poorest in society.
Income Inequality has to do with... - Answers How evenly income is distributed across citizens
of a population.
If income inequality is high... - Answers The majority of wealth is owned by a small proportion of
citizens.
If income inequality is low... - Answers Wealth is evenly distributed across population.
Income inequality is (high/low) in the US?? - Answers High
Social insurance is... - Answers - A system of compulsory contribution to provide government
assistance in sickness, unemployment, etc.
- Receiving benefits is conditional on payment into social insurance programs.
Social insurance is generally viewed somewhat (positively/negatively) by the public - Answers
Positively
Redistribution involves... - Answers Taking from those who have more and giving it to those that
have less.
Redistribution is generally seen as... - Answers Less favorable by the public as compared to
social security and unemployment insurance.
Social Security involves... - Answers - Benefits to retired people and those who are unemployed
or disabled.
- Established in 1935 by FDR
What is economic growth? - Answers The increase in the market value of the goods and
services produced by an economy.
A recession is... - Answers A negative growth rate.
Economic growth is measured by... - Answers The percent rate of increase in growth domestic
product (adjusted for inflation) or 'real GDP'
The employment rate is... - Answers Ratio that measures the proportion of the country's working
-age population that is employed.
Inflation is... - Answers The purchasing power of money.
Inflation is often caused by... - Answers Increases in the production of money or excess money
in the economy.
Balance of trade involves... - Answers Imports and exports
Positive balances in trade are desirable because... - Answers A country is less dependent on
others for products services.
The Classical, or Laissez-faire model states that... - Answers We should rarely intervene;
Supply and demand are natural regulatory tools
The economy regulates itself.
Keynesian approach... - Answers - Encourages deficit spending
- Government spending as a means by which to curb recessions (especially in the creation of
public sector jobs)
- Argues that austerity increases the burden on citizens and prolongs recessions
How do we 'manage' the economy? - Answers - Monetary Policy
- Fiscal Policy
- Regulation
Monetary policy involves... - Answers Managing the supply of money.
Monetary policy is carried out by... - Answers The Federal Reserve
Main job: setting the discount rate
Fiscal policy involves... - Answers Taxing and Spending
, Fiscal policy is carried out by... - Answers The President and Congress
In a proportional tax system.... - Answers Everyone, regardless of income, pays the same
fraction of income in taxes (Russia, Saudi Arabia, Ukraine, Estonia)
In a regressive tax system... - Answers Poor entities pay a higher fraction of their income in
taxes than do higher-income entities (Ex: Sales Tax; Sin Taxes)
In a progressive tax system... - Answers Lower-income entities pay a lower fraction of their
income in taxes than do higher-income entities. (US, UK, France)
Regulation involves... - Answers Government intervention in the decisions that firms make or in
market outcomes.
Rawles (1971) "Veil of Ignorance" - Answers - Decisions should be made without individual
concern or knowledge of their position in society.
- Maximize the resources—benefits, rights, and so on—available to the least well off in society
so as to ensure a floor for the poorest in society.
Income Inequality has to do with... - Answers How evenly income is distributed across citizens
of a population.
If income inequality is high... - Answers The majority of wealth is owned by a small proportion of
citizens.
If income inequality is low... - Answers Wealth is evenly distributed across population.
Income inequality is (high/low) in the US?? - Answers High
Social insurance is... - Answers - A system of compulsory contribution to provide government
assistance in sickness, unemployment, etc.
- Receiving benefits is conditional on payment into social insurance programs.
Social insurance is generally viewed somewhat (positively/negatively) by the public - Answers
Positively
Redistribution involves... - Answers Taking from those who have more and giving it to those that
have less.
Redistribution is generally seen as... - Answers Less favorable by the public as compared to
social security and unemployment insurance.
Social Security involves... - Answers - Benefits to retired people and those who are unemployed
or disabled.
- Established in 1935 by FDR
