Macroeconomics Quiz 2021

3 PAGES. Questions and Answers

Questions for Chapter 4:
What is the specific market failure justification for government spending on (a) public universities, (b) health care, (c) trash pickup, (d) highways, (e) police, and (f) solar energy? Would a purely private economy produce any of these services?

If smoking generates external costs, should smoking simply be outlawed? How about cars that pollute?

The government now spends over $700 billion a year on Social Security benefits. Why don't we leave it to individuals to save for their own retirement?

Questions for Chapter 5:
The manuscript for this book was typed for free by a friend. Had I hired a secretary to do the same job, GDP would have been higher, even though the amount of output would have been identical. Why is this? Does this make sense?

GDP in 1981 was $2.96 trillion. It grew to $3.07 trillion in 1982, yet the quantity of output actually decreased. How is this possible?

Why is it important to know how much output is being produced? Who uses such information?

Questions for Chapter 6:

Should the government replace the wages of anyone who is unemployed? How might this affect output and unemployment?

Why do people expect inflation to heat up when the unemployment rate approaches 4 percent?

Why is frictional unemployment deemed desirable?