Economics Discussion

-Supply and Demand
1) A diamond dealer in Beverly Hills finds that when he advertises his diamonds on television he sells more diamonds although he has secretly increased the prices. This rise in sales, he says, clearly indicates that demand is upward and not downward sloping.

The reason for this is because diamonds are luxury goods whose demand curve is downward sloping hence an increase in price leads to an increase in demand.

-Households, Firms, and Government

1)      If Jane spends most of her money on her car, then according to an economist which assumption should we make about this household?

None of her income goes to savings.

2)      Disneyland is a public good. = TRUE.

3)      Public telephones are a public good/service. = FALSE.

4)      Your neighbor has spent a lot of money improving his garden. a) If you enjoy the view, then what type of a spillover is it? Positive spillover effect

b) If you hate the new noisy garden, then what type of a spillover is it? Negative spillover effect.

5)      In the circular flow, do rents go to firms or households? Firms.

-The Federal Budget, in Doc Sharing 

1.      What do you understand by the term “fiscal year”?

This the period where a government or a company uses for purposes of accounting and preparation of financial statements, and it may or may not be the same as a calendar year.

2. What do you understand by discretionary and mandatory government spending in the US. Give two examples of each.

Discretionary government spending is the expenditures that are incurred by the government that are set on yearly basis as need arise and they are subject to adjustments by the members of the congress yearly. Examples include defense budget and education.

Mandatory government expenditure on the other hand spending that MUST be incurred and the government is obligated by previously enacted laws to incur such expenditure. They include social security and paying interest on national debt and

3.     What do you understand by means-tested and not-means tested programs? Give two examples of each.

Means-tested programs are methods used to determine whether someone is eligible for a financial assistance program. They include means used to test for bankruptcy as well as in the distribution of care benefits as it has been fronted as a possible solution for the social security problem.

Non-means tested programs are one whereby eligibility is not based on one having a certain level of financial means. Two perfect examples are the food stamps program and Medicare.

4. What is the difference between budget deficit and debt?

A budget deficit refers to the shortfall between what the government spends during a single year compared to what it brings in during that single year. On the other hand, national debt is the accumulation of all the budget deficits for every year ever since the country has been in existence. The major difference therefore comes from the time frames where deficit is for one year while debt is a deficit accumulation of many years.