ECN 211 EXAM 2 ASU LATEST ACTUAL EXAM 200 QUESTIONS AND CORRECT DETAILED ANSWERS WITH RATIONALES|AGRADE

ECN 211 EXAM 2 ASU LATEST 2023-2024 ACTUAL EXAM 200 QUESTIONS AND CORRECT DETAILED ANSWERS WITH RATIONALES|AGRADE Where is unemployment generally low and why? - ANSWER- Japanthey do not hire and fire like the US, hold onto workers Why did Germany have a big drop in unemployment? - ANSWERThey majorly reconstructed their labor market Why is there unemployment? - ANSWER- surplus of labor What are the problems with the solutions to unemployment? - ANSWER- wages won't fall (minimum wage, social norms, contracts), people can not move jobs quickly, people are not TVs (have to pay more than once) How do you fix unemployment? - ANSWER- Less supply or more demand Less supply: Policies to reduce people in the labor market (more retirement and students) More demand: more spending, lower wages, increase skills and sector transferability How do you improve market efficiency? - ANSWER- Improve job search networks Where is most government spending? - ANSWER- Old and poor Why is government necessary? - ANSWER- provide public goods that individuals will not Why has defense spending declined? - ANSWER- There is no cold war What is part of the "other" category in gov spending? - ANSWERanything that promotes future success (environment, education, science) How does the US spend and tax? - ANSWER- spend like a 1st world country, tax like a 3rd world country Is national debt/national GDP a good measure of debt? - ANSWER- No, debt is nominal so the ratio will decline if GDP growth is bigger. However, the debt is still growing Why is the US in particular in debt? - ANSWER- expensive healthcare, low taxes 1. 1980: cutting taxes, increase defense 2. 2000: cutting taxes, more on healthcare and wars 3. Great Recession: decease in revenue, increase in gov spending What drives debt in any advanced economy? - ANSWER- retiring population with low birth rates Two issues with social security - ANSWER- 1. first generation got mostly free benefits, moving the system from forced retirement to pay as you go 2. next generations weren't taxed enough in part due to miscalculations of life expectancy Laffer Curve - ANSWER- a supposed relationship between economic activity and the rate of taxation that suggests the existence of an optimum tax rate that maximizes tax revenue Problem with laffer curve - ANSWER- taxes do not pay for themselves, assumption that high tax rates disincentivize work Future budget issues - ANSWER- 1. run a huge deficit- could create a fiscal crisis 2. raise taxes substantially 3. cut spending substantially Why do we have health insurance? - ANSWER- people are risk averse, health care crisis is expensive, spreads risk among population Premium - ANSWER- an amount to be paid monthly for an insurance policy. Deductible - ANSWER- Amount you must pay before you begin receiving any benefits from your insurance company What is the correlation between premiums and deductibles? - ANSWER- Negative correlation- can not have high both or low both Young like low premium and high deductible Old/sick like high premium and low deductible Is the US healthcare system effective? - ANSWER- high cost system, below average results for life expectancy What is the US healthcare system good at? - ANSWER- finding rare disease solutions, new drug creation Why is US healthcare so expensive? - ANSWER- we pay more for routine things: lack of single payer system to bargain, health administration costs, incorrect preventive medicine incentives, no cost effectiveness analysis