2024 – Question Problem 1 Why are we called a mixed economy and what is the invisible

Question/Problem 1

Why are we called a “mixed economy” and what is the “invisible hand” that directs our output mix?

Question/Problem 2

Look at the data in Table A.1 (the chapter 1 appendix); assume this data is reliable. Now look at the graph in figure A.1. Does this graph prove that additional study will produce higher grades? Explain your answer.

Question/Problem 3

Read the Policy Perspective at the end of Chapter 1. Explain how this article illustrates the economic principle: “There is no free lunch”.

Question/Problem 4

If taxes on the rich were raised to provide more entitlements for the poor, how would the willingness to work likely be affected for the rich and for the poor? What would likely happen to total macroeconomic output?

Question/Problem 5

Explain how a “market failure” can produce a macroeconomic “non-optimal output mix”. Cite a specific example of a real-world “market failure” in your explanation. Prepare a graph that displays a production possibilities curve to illustrate your explanation. (Develop your own graph/curve; do not copy/paste from another source.)

Question/Problem 6

Explain why income taxes are considered “progressive” and sales taxes are considered “regressive”.

Question/Problem 7

When comparing the USA and China: China has (1) as many natural resources as the USA and also has (2) far more labor resources than the USA. So why is output/GDP so much higher in the USA than in China?

Internet Question

www.bea.gov (Links to an external site.)

First review this site and the economic information it offers.

Next research the most current data on macroeconomic output and growth. Under “Economic Accounts – National”, click on “Gross Domestic Product”. From this location click on and review “News Release: Gross Domestic Product”. Refer to the menu on the right side of this webpage and open up the “Full Release and Table”. Now review the summary and the data in the tables. Answer these questions:

a. What was the Real GDP growth rate for the past two quarters? (Hint: Table 1; average the last two quarters released)

b. What caused the changes in GDP growth for the most recent quarter?

c. What is the current dollar value for the nation’s annual GDP (seasonally adjusted) as of the most recent report?

d. The unemployment rate remains persistently high at over 5%. Economists estimate we will need a sustained 3-4% annual Real GDP growth rate to reduce unemployment to 4-5% (the “full employment” rate.) If the growth rate from the past 6 months continues, what does that imply for our future unemployment rate?

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