How does social mobility in the United States compare to that in Britain? Why do you think this is so? References. Multiple Choice

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1 1. Award: points How does social mobility in the United States compare to that in Britain? Why do you think this is so? There is less social mobility in the United States than in Great Britain. This is because there is greater discrimination in the United States. Additionally, the United States has less effective expenditure programs and a less progressive tax system than Great Britain. There is more social mobility in the United States than in Great Britain. This is because there is less discrimination in the United States. Additionally, the United States has more effective expenditure programs and a more progressive tax system than Great Britain. There is less social mobility in the United States than in Great Britain. This is because most businesses in the United States are corporations, which are known for glass ceilings. Most businesses in Great Britain are sole proprietorships, which allow people to more easily climb the income ladder. There is less social mobility in the United States than in Great Britain. The United States is a pure capitalist economy, while Great Britain is a welfare capitalist society. Social mobility is easier in a welfare state. Difficulty: 02 Medium Learning Objective: Explain how income, wealth, and poverty are measured, and how their real-world measures changed over time. 2. Award: points Given the following data about the economy: Page 1 of 10

2 Profit $242 Consumption 831 Investment 640 Government spending 280 Net exports 262 Rent 30 Depreciation 24 Net foreign factor income 2 Interest 144 Employee compensation 1,621 Instructions: Enter your responses as whole numbers. a. Calculate aggregate output (GDP) and aggregate income. Aggregate output (GDP): $ Aggregate income: $ b. Compare the two calculations in a. Why are they not precisely equal? GDP must be adjusted for net foreign factor income. GDP must be adjusted for transfer payments. GDP must be adjusted for income taxes. GDP must be adjusted for depreciation. c. Calculate GNP. GNP: $ d. Calculate NDP. NDP: $ Worksheet Difficulty: 03 Hard Learning Objective: Calculate aggregate income and explain how it relates to aggregate production. Page 2 of 10

3 3. Award: points Below are nominal GDP and GDP deflators for four years. Year Nominal GDP in billions GDP Deflator Year 1 $21, Year 2 21, Year 3 22, Year 4 23, a. Calculate real GDP in each year. Instructions: Round your responses to the nearest whole number. For Year 1, GDP is $ billion. For Year 2, GDP is $ billion. For Year 3, GDP is $ billion. For Year 4, GDP is $ billion. b. Did the percentage change in nominal GDP exceed the percentage change in real GDP in any of the last three years listed? Year 2: (Click to select). Year 3: (Click to select). Year 4: (Click to select). c. In which year did society s welfare increase the most? (Click to select). Worksheet Difficulty: 03 Hard Learning Objective: Distinguish real from nominal concepts. Page 3 of 10

4 4. Award: points What are three costs of inflation that economists focus on? Instructions: You may select more than one answer. Click the box with a check mark for correct answers and click to empty the box for the wrong answers. informational costs institutional costs economic costs distributional costs implementation costs policy costs allocative costs Check All That Apply Difficulty: 01 Easy Learning Objective: List and discuss the costs and benefits of inflation. 5. Award: points A reservation wage is the wage a person requires before quitting a job. after accepting a job. before accepting a job. after quitting a job. Page 4 of 10

5 How is the reservation wage related to structural unemployment? The higher a person's reservation wage, the higher will be structural unemployment. The lower a person's reservation wage, the higher will be structural unemployment. The higher a person's reservation wage, the lower will be structural unemployment. Difficulty: 01 Easy Learning Objective: Explain Okun s rule of thumb and summarize the debate about the appropriate target rate of unemployment. 6. Award: points Inflation, on average, makes people neither richer nor poorer. Therefore it has no cost. True or false? Explain. True, because people get wage increases to offset inflation. False, because people get wage increases to offset inflation. False, because prices no longer carry as useful information and there are redistributional effects. True, because prices no longer carry as useful information and there are redistributional effects. Difficulty: 02 Medium Learning Objective: List and discuss the costs and benefits of inflation. 7. Award: points Page 5 of 10

6 Categorize each of the following as cyclical or structural unemployment: a. An autoworker is laid off during a recession until car sales pick up. b. A steel worker loses his job because steel is now produced in foreign countries with lower wages. c. A compositor loses her job because the work is now outsourced to India. d. An unemployed person turns down job offers that do not pay the wages of his previous job. Difficulty: 02 Medium Learning Objective: Explain Okun s rule of thumb and summarize the debate about the appropriate target rate of unemployment. 8. Award: points What would the Lorenz curve for lawyers represent? By definition, you cannot develop a Lorenz curve for a specific profession such as lawyers. It would be a geometric representation of the distribution of income among lawyers in a given country at a given time by quintile. It would be a geometric representation of the ratio of incomes by lawyers to all professions over a 5- year period. Page 6 of 10

7 It would be a geometric representation of the ratio of incomes by lawyers to all people by income quintile. Difficulty: 02 Medium Learning Objective: Explain how income, wealth, and poverty are measured, and how their real-world measures changed over time. 9. Award: points Would the Lorenz curve for the world be more or less bowed out compared to the Lorenz curve for the United States? The Lorenz curve for the world would be more bowed out, since income is very widely disparate among countries. A Lorenz curve among countries does not make sense, since it is defined as income within a single country. The Lorenz curve for the world would be almost perfectly straight, since income is assessed relative to productive capacity. The Lorenz curve for the world would likely be less bowed out, since there are very few rich countries and a lot of very poor countries. Learning Objective: Explain how income, wealth, and poverty are measured, and how their real-world measures changed over time. 10. Award: points Page 7 of 10

8 Categorize each of the following as cyclical or structural unemployment: a. An autoworker is laid off during a recession until car sales pick up. b. A steel worker loses his job because steel is now produced in foreign countries with lower wages. c. A compositor loses her job because the work is now outsourced to India. Difficulty: 02 Medium Learning Objective: Explain Okun s rule of thumb and summarize the debate about the appropriate target rate of unemployment. 11. Award: points Why are we concerned with the distribution of income between whites and blacks, but not between redheads and blondes? Based on numerous statistical studies, ability and pay are related to hair color, but not race. Since government cannot control ability, income distribution with regard to hair color is not a concern. The United States employs a progressive tax to redistribute income based on sociological and cultural differences, but not hair color. It is easier to collect data based on race than hair color. Often our concerns are related to the availability of data. Research has shown that income differs substantially between whites and blacks. Some of these Page 8 of 10

9 variations are the result of sociological and cultural differences, but a substantial fraction is the result of discrimination. There is no evidence to indicate discrimination exists on the basis of hair color. Mulitple Learning Objective: Explain how income, wealth, and poverty are measured, and how their real-world measures changed over time. 12. Award: points How is the distribution of income related to the emergence of the Tea Party and the Occupy movement? The Occupy movement emerged to protest (Click to select). The Tea Party has emerged to protest (Click to select). Difficulty: 01 Easy Learning Objective: Summarize the socioeconomic tensions that high income and wealth inequalities can cause. 13. Award: points Page 9 of 10

10 What does the quantity theory predict will happen to inflation if the money supply rises 10 percent? Instructions: Enter your answer as a whole number. Inflation will (Click to select) by percent. Difficulty: 01 Easy Learning Objective: Summarize the inflation process and the quantity theory of money. 14. Award: points What does the quantity theory predict will happen to inflation if the money supply rises 10 percent? Instructions: Enter your answer as a whole number. Inflation will (Click to select) by percent. Difficulty: 01 Easy Learning Objective: Summarize the inflation process and the quantity theory of money. Page 10 of 10