Potpourri but Make It Fiscal
Will formulas be provided on the exam?
yes
True or False?
Gross domestic product (GDP) measures total expenditures on final goods and services during a given period of time.
TRUE
At Fenway Park, home of the Boston Red Sox, seating is limited to 38,000. Hence, the number of tickets issued is fixed at that figure.
Seeing a golden opportunity to raise revenue, the city of Boston levies a per ticket tax of $5 to be paid by the ticket buyer.
True or False: Both the team’s owners and the fans share the tax burden because demand is elastic.
False
Because supply is fixed at 38,000 seats, the team's owners cannot respond to changes in price, so supply is perfectly inelastic in this case. This means that the entire tax burden will fall on the team's owners when a $5 per ticket tax is imposed on fans
A binding price ceiling creates a(n) ________
shortage
If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is
price elastic
How much of your grade is based on exams?
60 %
Why is real GDP a more accurate measure of an economy's production than nominal GDP?
Real GDP is not influenced by price changes, but nominal GDP is.
If the government places a $500 tax on luxury cars, the price paid by consumers will rise by:
more than 500
less than 500
exactly 500
less than 500
- unless demand is perfectly inelastic
The burden of a tax falls more heavily on the sellers in a market when demand is more ________ and supply is more ________
elastic; inelastic
If the cross-price elasticity between two goods is negative, the two goods are likely to be
complements
When is your next exam?
Wednesday, October 15th
When a U.S. company purchases and imports electronic parts from Taiwan to use to produce laptops within the United States, this purchase increases the BLANK 1 component of GDP while also BLANK 2 net exports by the same amount. Therefore, the purchase of electronic parts from Taiwan causes BLANK in US GDP.
BLANK 1: investment
BLANK 2: decreasing
BLANK 3: no change
Find the price buyers pay, the price sellers receive, and the quantity sold before and after the tax.
Before the tax:
6,6,4
After the tax:
7,5,3
Within the supply-and-demand model, a tax collected from the sellers of a good shifts the ________ curve ________ by the size of the tax per unit.
supply, upward
The price elasticity of demand is defined as
the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good
U.S. gross domestic product (in contrast to gross national product) measures the production and income of _______.
people and factories located within the borders of the United States
Calculate the nominal and real GDP for 2024
nominal: 920
real: 800
A senator wants to raise tax revenue and make workers better off. A staff member proposes raising the payroll tax paid by firms and using part of the extra revenue to reduce the payroll tax paid by workers.
True or False? This would make workers better off.
False
This arrangement would most likely make workers worse off because the tax wedge would be larger.
The surplus caused by a binding price floor will be greatest if demand is ________ & supply is ________.
elastic; elastic
A decrease in supply (shift to the left) will increase total revenue in that market if
demand is price inelastic
DOUBLE JEOPARDY!
If U.S. GDP exceeds U.S. GNP, then...
foreigners are producing more in the United States than U.S. Nationals are producing in foreign countries.
Which of the following scenarios are included in GDP?
4 & 6
Suppose that the local government of Boise decides to institute a tax on wine consumers. Before the tax, 45 billion liters of wine were sold every year at a price of $10 per liter. After the tax, 38 billion liters of wine are sold every year; consumers pay $14 per liter (including the tax), and producers receive $7 per liter.
How much is the tax? How much do consumers pay? How much do producers pay?
7,4,3
Which side of the market is more likely to lobby government for a price floor?
The sellers
Using the midpoint method, the price elasticity of demand for ground beef between point A and point B is approximately:
This indicates that demand for ground beef is:
between points A & B.
0.37 & Inelastic