( 1.) If the government wishes to lower the price of a good without creating an
ID: 1127743 • Letter: #
Question
( 1.) If the government wishes to lower the price of a good without creating an imbalance in the market, what is the best way to accomplish this?
A. Impose a price ceiling.
B. Impose a price floor.
C. Tax the good.
D. Subsidize the good.
( 2.) If a price floor is nonbinding, the market price will be __________ the market equilibrium.
A. Below
B. Above
C. Equal to
( 3.) Real GDP differs from nominal GDP in that real GDP accounts for
A. Government purchases.
B. Changes in prices.
C. The underground economy.
D. All of the above.
( 4.) Our standard measure of GDP will account for all but which of the following:
A. Military spending.
B. Domestic air travel.
C. Businesses building up inventory.
D. Sales of illegal bootleg DVDs.
( 5.) Which of the following is not considered Government Purchases for the purposes of calculating GDP?
A. The government purchases a tank.
B. The government pays the salary of an IRS agent.
C. The government purchases a new office building.
D. The government issues a Social Security check to a retiree.
Explanation / Answer
Ans 1 The correct option is d i.e Subsidize the goods because subsides reduces the price paid by the buyer.
Ans 2 The correct option is c i.e Equal to because when the price floor is not bidding it means that the price has not reached the price floor i.e. market clearing equilibrium price is above the price floor and the market price will be an equilibrium price.
Ans 3 The correct option is b i.e. Change in prices because Real GDP = Nominal GDP/price level.
Ans 4 The correct option is d i.e. Sales of illegal bootleg DVDs because the calculation of GDP does not include illegal businesses.
And 5 The correct option is d i.e. The government issues a social security check to a retiree because social securities are included in the disposable and national income in the calculation of GDP but not in the government purchases.
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