SIT 18S-ECON103 Version B 33. As of today, the U.S. federal debt exceds $21 till
ID: 1132374 • Letter: S
Question
SIT 18S-ECON103 Version B 33. As of today, the U.S. federal debt exceds $21 tillion. Should we be concerned about a growing federal debt? Yes, because it is likely that the government will confiscate the savings of individuals a. to pay for the debt. b. Yes, because if the debt grows too large, we will have to receive bailouts from other countries, which means they will be able to control our policy and economy C. No, because budget deficits are more important to worry about than the federal debt. d. Yes, because a large federal debt may slow the rate of economic growth in the future. e. No, because federal debt, unlike private debt, does not have to be repaid. Table 3. Consider the following U.S. data, where gross domestie product (GDP) values are measured in rrillions of dollars YearNominal GDP 2008 2009 $14.55 2010 15.23 Real GDP GDP Deflator $14.89 103 100 $14.93 $15.19 2011 104 34. Refer to Table 3. What was the inflation rate between 2010 and 2011? Round to the nearest decimal. a. 1.8 percent d. 2.2 percent e. 3.7 percent b. 1.6 percent c. 2.0 percent 35. Suppose a major hurricane hits the eastern coast of Florida and only destroys significant amounts of physical capital. In the short run, you would expect that a. there will be a downward movement along the production function. b. there will be no effect on the production function. c. the production function will shift downward. d. the production function will shift upward. e. there is an upward movement along the production function. 36. Suppose you are offered a $5,000 raise at work. Your current income tax rate is 25 percent. Your marginal income tax rate is 28 percent. Your average tax rate is 20 percent. The additional income tax you owe to the federal government (assuming you stay in the same rate bracket) if you accept the job will be a. $250 b. $1,000 c. $1,400. d. $150. e. $1,250. 37. To avoid the negative effects of unexpected inflation, workers have an incentive to a. b. c. d. e. expect a certain level of inflation and to negotiate their contracts accordingly. never negotiate wage contracts. stay unemployed during years of inflation. lock in their current wages for years. change jobs regularly Page 7 /11Explanation / Answer
Ans:
33) Option D
Yes, because a large federal debt may slow the rate of economic growth in the future.
Larger federal debt increases the finance cost and this will have negative effect on economic growth.
34) Option E
Inflation rate between 2010 and 2011 is 3.7 percent.
Analysis
GDP Deflator = Nominal GDP / Real GDP * 100
Nominal GDP = (GDP Deflator * Real GDP) / 100
Nominal GDP for 2011 = (104 * $15.19) / 100
= $15.88
Inflation rate between 2010 and 2011 = ($15.88 - $15.23) / $15.23
= 0.037 or 3.7%
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