Practice Exam_2_ans-4

Practice Exam_2_ans-4 - Name_ Discussion Section...

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Name______________________________________________ Discussion Section Instructor____________________________ *Note if you do not know your TA’s name, you will be deducted 1 point Econ 102: Fall 2011 (Eudey) Practice Second Exam The exam is worth 30 points. Please circle your selection in the multiple choice problems, and write your answer in the space provided for the short-answer problems. Each multiple choice question is worth 1 point. Short-answer questions are each worth from 1 to 4 points, as indicated at the start of each short-answer problem. No books or notes are allowed during the exam.
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Write a short answer in the space provided. 1. (1/2 point) What is the current share in GDP of the federal debt held by the public? Answer: about 70% 2. (1/2 point) Why is it useful to think of the federal debt held by the public as a share of GDP? Answer: It is a measure of the ability to raise taxes in order to pay off the debt—if the debt is a small percentage of GDP it will be relatively easy to raise taxes to pay it off 3. (2 points) What three general approaches does the CBO outline as the ways to address the size of the U.S. government budget problem? Which approach, or combination of approaches, do you prefer? Why? Answer: Increase taxes, cut entitlements to the elderly, cut the role of government in other areas of the economy (1/3 point each). 1 point for the quality of the argument they give behind their opinion. 4. (1 point) What are the two basic reasons inside lags occur? Answer: Inside lags occur because it takes time for policy makers to identify and recognize a problem in the economy, and once the problem has been recognized it takes more time for policy makers to take corrective actions.
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5. (1 point) What is the federal government's largest source of revenue? Answer: individual income taxes Multiple Choice: Circle the letter for the best answer from the choices provided 6. Which component of federal spending is included in GDP? A) net exports
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This note was uploaded on 03/28/2012 for the course ECON 102 taught by Professor Drozd during the Fall '08 term at Wisconsin.

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Practice Exam_2_ans-4 - Name_ Discussion Section...

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